WASHINGTON, Jan 5 (Reuters) - The former CEO of an assisted living services provider has filed a lawsuit against U.S. securities regulators, saying they are violating her right to a jury trial.
In her complaint, filed late on Friday, Assisted Living Concepts Inc former Chief Executive Laurie Bebo alleges that the Securities and Exchange Commission, by filing charges against her in its in-house court instead of a federal court, chose a legal venue that greatly disadvantages her defense and gives her little time to review 1.5 million pages of investigative files.
“The Commission has stripped her entirely of the ability to secure the testimony at the hearing, much less at a deposition, of key witnesses in the case,” the complaint says.
Bebo and the company’s former chief financial officer, John Buono, were sued by the SEC in early December over allegations they devised a scheme to inflate occupancy rates so they could meet certain leasing targets. In turn, the SEC said the company issued false and misleading financial statements between 2009 and 2011.
Bebo is the latest in a string of defendants who have challenged the SEC in recent years for bringing charges in its in-house court.
The SEC has stepped up its use of administrative proceedings since the passage of the 2010 Dodd-Frank Wall Street reform law.
The law lets the SEC seek more relief and bring cases against a wider array of defendants through an administrative proceeding. An SEC judge presides over the case and trials are typically fast-tracked.
Appeals must be made before the full five-member commission before they can be heard in a federal appeals court.
Many lawyers say this process is wrought with conflict because the SEC commissioners authorize which cases to pursue.
In addition, administrative proceedings lack the same procedural protections available in federal courts, including the ability to take depositions, spend more time gathering evidence and present cases to juries.
In December, a federal judge rejected a similar appeal.
The SEC had sued investment adviser Wing Chau in administrative court over fraud charges, and Chau challenged the venue. But a federal judge ruled that the court did not have jurisdiction to hear the constitutional case.
The SEC did not immediately respond to a request for comment on Bebo’s complaint.
Reporting by Sarah N. Lynch; Editing by Dan Grebler