2018 Lane Reports

Time to Strip Unaccountable Judges of Their Authority

The Lane Report, May 2018
Tuesday, May 1, 2018 10:00 am
by Marc J. Lane

Perhaps no other provisions of our Constitution have generated more mythology and controversy than Article Two, which creates the office of the President and defines his prerogatives, but with only a few vague instructions.

It’s well known that the President is required to send a state of the union message "from time to time," and to "take care that the laws be faithfully executed.” Beyond those obligations, the Constitution grants him authority that is his and his alone: (1) he is the commander-in-chief of the armed forces; (2) he can require "heads of departments" to give him their opinions in writing; (3) he receives ambassadors, and; (4) he can grant pardons for Federal offenses.

Other powers are exercised jointly by the President and others. He can veto a bill, subject to override by 2/3 of both Houses. He can convene Congress on "extraordinary occasions," but ordinarily may not force it to adjourn. He may make treaties and appoint “officers of the United States” with the advice and consent of the Senate. However, “inferior” officers can be appointed either by the President alone, the head of a Government department, or a court.

Specifically, Article II, section 2 provides: “The President … by and with the Advice and Consent of the Senate, shall appoint … all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law: but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.”

Only now, some 230 years after the Constitution was ratified, the Supreme Court is considering whether administrative law judges are “officers of the United States” who must be appointed by the President, a Government department head or a court. The Court’s ruling, which is imminent, could dramatically change how justice is meted out by Federal agencies including the Federal Deposit Insurance Corporation, the Department of Labor, the Department of Veterans Affairs, the Department of Commerce, the Patent and Trademark Office, and the Consumer Financial Protection Bureau.

It’s the Securities and Exchange Commission’s in-house judges whose very appointment is at issue in the pending case, Lucia v. SEC. The facts of the case are plain vanilla: financial adviser Raymond Lucia was fined $50,000 after an administrative law judge found that he had misled his prospective clients.

But the legal issue is thorny. Throughout protracted administrative review and litigation, Mr. Lucia’s lawyers have argued that the SEC’s judges aren’t appointed in a way that complies with the Constitution’s Appointments Clause. They’re selected by the SEC’s staff from a list of three candidates provided by the Office of Personnel Management and thus are beholden to the SEC as a captive tribunal, so, according to Mr. Lucia and his legal team, their ruling shouldn’t stand. Surprisingly, the Justice Department has recently sided with Mr. Lucia, which has led the Supreme Court to appoint counsel to represent the other side of the legal issue, supporting the administrative law judges’ ability to render decisions.

The position of the Court-appointed counsel is that administrative law judges aren’t officers of the United States. Since the SEC ratifies their judgments, they’re just employees exercising advisory or investigative functions, and the Appointments Clause doesn’t even come into play.

Mr. Lucia and his lawyers have the better argument. In the words of Mark Perry, one of Mr. Lucia’s attorneys, unconstitutionally hired judges are “deciding the rights of citizens without the benefits of a trial by jury or an independent judiciary.” Administrative law judges who weren’t appointed by the heads of their departments have no constitutional authority to rule and, for that reason, their decisions are unconstitutional.

Moving away from in-house courts could clog up the Federal judiciary – but the solution to the problem is simple. Administrative law judges should be appointed by the heads of the agencies that they work for, not by any lower-ranking person. In fact, the SEC has already accepted this solution, and the commissioners themselves have re-appointed their currently serving administrative law judges. To appoint administrative law judges in any other fashion might be expedient, but would surely be unjust.


Marc J. Lane is a Chicago attorney and financial adviser and the vice chair of the Cook County Commission on Social Innovation.

Peterborough's problem was daunting: Sixty percent of prisoners serving short-term sentences historically had gone on to re-offend within a year after their release. But policymakers were confident that a solution was within their reach. They attracted private investment to pay experienced social service agencies to provide intensive, multidisciplinary support to short-term prisoners, preparing them to re-enter society and succeed outside the penal system. - See more at: http://www.chicagobusiness.com/article/20131007/OPINION/131009850/a-new-kind-of-futures-contract-for-illinois#sthash.ThgxeiFt.dpuf

The world's first social impact bond, or SIB, was introduced in 2010 to fund innovative social programs that realistically might reduce recidivism by ex-offenders in Peterborough, England, and, with it, the public costs of housing and feeding repeat offenders. Prudently building on the strengths of that initiative, Illinois Gov. Pat Quinn is rolling out SIBs to help solve some of the state's most vexing social problems.

A SIB isn't a traditional bond where investors are guaranteed a fixed return but a contract among a government agency that agrees to pay for improved social outcomes, a private financing intermediary and private investors. SIBs shift the risk of experimenting with promising but untested intervention strategies from government to private capital markets, with public funds expended only after targeted social benefits have been achieved.

Peterborough's problem was daunting: Sixty percent of prisoners serving short-term sentences historically had gone on to re-offend within a year after their release. But policymakers were confident that a solution was within their reach. They attracted private investment to pay experienced social service agencies to provide intensive, multidisciplinary support to short-term prisoners, preparing them to re-enter society and succeed outside the penal system.

The government decided which goals would be supported, but exactly how those goals would be achieved was left to the private sector. It was the investors, through a bond-issuing organization, who ultimately endorsed the allocation of investment proceeds — how much would be invested in job training, drug rehabilitation and other interventions.

If the Peterborough plan eventually shrinks recidivism rates by 7.5 percent or more, the government will repay the investors' capital and share the taxpayers' savings with them, delivering up to a 13 percent return. If the target isn't hit, the investment will have failed and the government will owe the investors nothing.

Illinois' SIB effort was spearheaded by the state's Task Force on Social Innovation, Entrepreneurship and Enterprise — the governor's think tank on social issues, which I am privileged to chair — with support from Harvard University's John F. Kennedy School of Government, the Rockefeller Foundation and the Aurora-based Dunham Fund. A request for information issued by the Office of Management and Budget on May 13 yielded responses from service providers eager not only to reduce recidivism here but also to create jobs, revitalize communities, improve public health outcomes, curb youth violence, cut high school dropout rates and alleviate poverty.

Now the governor has issued a request for proposals intended to spur better outcomes for Illinois' most at-risk youth — by increasing placement stability and reducing re-arrests for youth in the state's Department of Children and Family Services, and by improving educational achievement and living-wage employment opportunities justice-involved youth most likely to re-offend upon returning to their communities.

Kudos to Mr. Quinn for bringing SIBs to Illinois. May they soon start delivering on their promise.

- See more at: http://www.chicagobusiness.com/article/20131007/OPINION/131009850/a-new-kind-of-futures-contract-for-illinois#sthash.ThgxeiFt.dpuf
The world's first social impact bond, or SIB, was introduced in 2010 to fund innovative social programs that realistically might reduce recidivism by ex-offenders in Peterborough, England, and, with it, the public costs of housing and feeding repeat offenders. Prudently building on the strengths of that initiative, Illinois Gov. Pat Quinn is rolling out SIBs to help solve some of the state's most vexing social problems. - See more at: http://www.chicagobusiness.com/article/20131007/OPINION/131009850/a-new-kind-of-futures-contract-for-illinois#sthash.ThgxeiFt.dpu

The Law Offices of Marc J. Lane, A Professional Corporation
70 West Madison Street, Suite 2050
Chicago, Illinois 60602-4256
(312) 372-1040
Nationwide: (800) 372-1040
Facsimile (312) 346-1040
Email:
success@MarcJLane.com

Websites: www.MarcJLane.com


Send this page to a friend
 

Announcing Marc J. Lane's 35th Book:

The Mission-Driven Venture: Business Solutions to the World's Most Vexing Social Problems

More About The Book
Our monthly newsletter