In a complaint filed Tuesday, CDO manager Harding Advisory and its principal Wing Chau allege that the SEC violated their due process and equal protection rights by “shoehorning” a case against them into an administrative proceeding instead of suing in federal court. The plaintiffs allege that an administrative hearing is wholly unsuitable for a complex case like theirs, especially given the rigid requirement that hearings occur within approximately four months of the matter being initiated. They seek to enjoin the proceeding, and force the SEC to sue in federal court instead. The plaintiffs allege that the SEC has refused to explain why their case, as compared to similar CDO cases, was “singled out” to be kept out of court, and argue that the SEC’s must be acting based upon one or more of the following improper motives:
First, the Commission has repeatedly stumbled in this Court in the prior cases it has brought here and, indeed, has lost more of those cases than it has won. A second, related motive concerns the application of the Commission’s AP rules to the facts and circumstances of this case. The highly accelerated and inflexible hearing schedule required by the rules, combined with what can only be described as a colossal document dump by the Division means that Plaintiffs would be required to go to trial before being capable of unearthing exculpatory evidence and using it at trial. . . . Given the pace of the AP and the rigid deadlines, exculpatory evidence will remain buried until after the trial in the AP has come and gone. Third, the Division’s investigation of Plaintiffs was tainted and the Commission has already taken other steps to foreclose inquiry into that misconduct and taint. By shoehorning the Plaintiffs into an AP where there are no depositions, no ability to make counterclaims and no meaningful motion practice, the Commission has continued to block Plaintiffs from developing a meaningful record of that wrongdoing. In short, the Commission intentionally and strategically singled out the Plaintiffs by bringing this case as an AP and effectively tying the Plaintiffs’ hands behind their backs.
The case is before Judge Kaplan