Lunch & Learn - Session 25

Hey, Tom Powell here with the Founder's Office, and joining me today is, uh, Jackie Kuiper. And we have a special guest that will be joining us here momentarily who I will introduce when she pops on. But, uh, Jackie, let's talk constitutional law. I know it's super exciting for most people, especially those of us that have advanced degrees in the space, right? But it actually impacts everybody else. And today we're going to be talking about First Amendment freedom of speech and how this actually impacts capital markets. Right. And why are capital markets so necessary to being able to have free enterprise operate in there? So Jackie is our general counsel, as we said. And Jackie, you've been on this ride with us now. Is it 10 years? Are we at 10 years? This year?

Not quite, not quite. 8, I believe.

8 years. That is crazy. Well, uh, I, I want to start here. So could you imagine, as we're talking about this, this First Amendment things, if the government could require you to stay silent about your own case forever, would you still settle? Because it's, it's not hypothetical, it's how the system actually works. If you're a founder, an investor, an operator, this is not just about capital rise raising. It's about your First Amendment rights and what happens, uh, to them when you come into contact with regulatory power. Our guest today is Peggy Little, and she spent more than 4 decades in those exact moments, not watching from the outside but inside the courtroom, arguing, shaping, and winning cases at the highest levels, including before the Supreme Court of the United States. She understands where power sits, how it's used, and what it takes to challenge it. That's why you should listen Regardless, if you ever think you're gonna bump up against the government, you want someone like Peggy Little on your side and NCLA. Peggy, thank you so much for joining us, and thank you for being truly my friend and my advocate and leading this fight against SCOTUS, or with SCOTUS, I don't know, in front of SCOTUS, I guess.

Getting ourselves to SCOTUS.

Getting ourselves to SCOTUS. There we go. Peggy, I think the first time, well, no, the first time you and I met in person was actually in DC, but we happened to meet in, uh, by phone because of another mutual introduction, in that I was fighting this case, others were fighting this case, and you were leading this type of case with a number of other respondents. Is that right?

That's correct. Um, we, we litigated this in the New York courts, uh, that's the Second Circuit. We also litigated it, um, in the Fifth Circuit Court of Appeals, and we made some progress. We had two judges that recognized this as prior restraint. And then we, at their urging, we took the actual rule, litigated that to the Ninth Circuit, which should have ruled in our favor since they had controlling precedents that would've required that outcome. But instead, like too many courts, did not really reach into the guts of this rule and understand how it suppresses people's First Amendment rights. And so we are now taking it to the Supreme Court and hoping that they will grant review.

So let's back up for just a second because some people aren't going to even know what case we're talking about or why we're even talking about or why this even relates to capital raising. And Jackie, if you go back in our conversations, when did the First Amendment come up? We're in— we were a service company in the capital markets space raising a lot of capital with founders out there. How did this even come about to where we would have a First Amendment consideration?

I don't think it did.

I don't think it did come up at all until the day we saw the first draft of a settlement.

Even in our first drafts, it wasn't an issue because we had specifically been negotiating on different terms, right?

Yeah, that's a crazy thing. So I look at this and say, why does this matter to the general population? And Peggy, we were talking just before you came on, we talked about this this morning. Are you familiar with the pound cake case? Have you heard this at all?

Not in that terms, no.

Well, and I don't know that I'm saying it right, but the guy is named— his name is Afro Man.

Oh yeah, Afro Man!

I love this man.

It's my hero.

It's Lemon Pound Cake.

Lemon Pound Cake. Yes, Lemon Pound Cake, right? So if I could be a rapper, we could get the story out there, spread a little bit faster. And apparently with all this character type stuff, but they just went through this case it shouldn't apply to everybody, because I think everybody thinks, well, the police aren't going to come breaking down my door, I'm just an innocent person. But so was he, right?

Well, he was, and he talked about it, which, you know, um, the, the government powers were offended that he did it and sued him. Sued him even though he was doing good rapping on why the government does not have the power to knock down his front door, search through his property, and, uh, and not even apologize, much less repair the damage. So like a resourceful American, he went out and made a record about it, and that got him sued by the government. Great thing is the jury tossed the government's case.

Yeah, isn't that great? So what we're talking about— I'm going to give you a little background. So for years and years and years, uh, we have been raising capital for our own ventures, for other people's ventures, and in many cases we've just been the background to help make sure that these things are done properly, that they're transparent for the retail investors that are out there or the high net worth family investors. And that was our company. We got involved with a group and that group got looked at very minutely for one little part of that case. And it ended up dragging us in for 5 years initially and 80,000 documents and multiple depositions. And over $4 million in expenses. And it wasn't our investment specifically. Again, we were operating as the service provider, right, for that scenario. And during that time, the SEC seems to be going along. And then the day that we're told, hey, we must take a settlement or this is gonna go forward and they're gonna be very nasty about reputations, They wrote the settlement offer. They said it's our settlement providing to them, but they wrote it.

It's, it's deceptive from its title to its closing paragraph.

And then there's a line in there that says you're signing this of free will and there's no coercion type scenario when you're backing against the largest, most powerful government in the world. Is sitting across the table and saying, by the way, if you don't do this, these are all the things we're going to do to you. And it just seemed like it's just crazy. And it seemed to us we didn't even know what was going on at the time. And we were educated, you know, in the legal realm, people in the finance realm, people, and still didn't even know the applications. But specifically, I was told by our securities counsel that if we didn't sign that, if we wanted to fight it, it would take a total of another 5 years, which would be 10 years, and approximately $10 million.

And the reputational damage.

And the reputation, they would just slaughter the reputation, right? So signed it, $75,000, which this is all public on that side, and that's where we got to.

Which, by the way, and your readers may not, or listeners may not realize that $75K is chump change. That means you really, there really wasn't a problem here. They just They, they want to save face and get money from you.

Well, I don't know. There were times that we were sitting in, uh, our deposition— I know I'm not supposed to talk about this stuff, but they had a whole team of government-paid lawyers for several days. I had ours, of course. I had to write the checks for ours, but somebody had to be writing the check for that other team of lawyers and accountants that were in that room, right, for days and for almost 5 years of that stuff. And to say that at the end of the day, a $75,000— it is, it's the parking ticket type scenario, right?

It really truly is. And one of your co-petitioners, Ray Lucia, even though they went after him for hundreds of thousands of dollars, ultimately they settled his case for $25,000. And that should signal to the public that this is an agency that knows it doesn't have much of a case at all, if at all. But what they love is they can force you to settle. They're in control of the timing. They are in control of whether you can settle and on every single term upon which you can settle. Knowing that they can do that and silence you, that means that they can routinely overcharge people, they can drag them through the mud, they can put them to enormous cost and delay and divert them from other consequential use of their time. People, of course, throw in the towel.

They do. I mean, and it just is— it's overwhelmingly, and it's so unbelievably stressful. I consider myself a pretty resilient person with some resources and, you know, a good education and people around me that I can ask questions of. I know a lot of people aren't in that same case when they come up against the government. But can we step back just a second?

Yes.

Does— when the SEC makes a claim and they say it's an action Uh, and then they stated as though it's fact, yet it was a settlement that was never adjudicated. Doesn't mean that it's necessarily facts, doesn't mean it's not facts, but it also doesn't mean it is facts. Is that— can you—

can you— that's, that's not only correct, but in part of those documents, they, they reassure you— this is actually how they lure you in— this is on a no-admit, no-deny basis. So you're saying, okay, you know, I don't get exoneration, but they don't get, you know, actual factual findings against me. So that sounds good, but when you read the entire document and the fact that they silence you for the rest of your life, and then they make you sign things that include that you agree that their charges said you did X, Y, or Z, what they're doing is they're having their cake and eating it too. They're telling you it's no-admit, but in fact they require you to agree to the very things that they had set forth in their complaint and that you can never contest them. That's underhanded. It's dishonest. If the SEC was actually operating properly to accomplish this end, okay, they would say, okay, let's agree about how much money Okay, and that was probably negotiated, uh, and so you, you, you pay them X amount of money to get off your back, and then they should issue a piece of paper to you that says, oh, and we are going to gag you for the rest of your life. They don't quite do that, do they? Instead, they make you sign a form that says, I consent to be gagged the rest of my life. You know you didn't consent, They know you didn't consent. You were forced to do that. So it's dishonest at its core.

Well, there's so many parts to it too. The other part of it is, is that, uh, and I'd love to take a poll because we can have people actually pop in and say this, but is there a case when the SEC files actual criminal charges ever? Can they— can the SEC file criminal charges against a person? Yes, they can. Okay, but the DOJ actually has to be the one that brings that forward, correct?

And they don't ask for or even get a gag. I'm reliably told that the DOJ lawyers think this is hysterical.

Well, actually, all the other divisions until recently don't even have anything remotely like this, right?

And not just this. I mean, Except for one other agency, which I will get to later, and it's an important point. The SEC is the only federal agency that thinks it can do this. Every other agency, state and federal, to my knowledge, can regulate Americans robustly, settle with them, and not gag them for the rest of their lives. So the SEC's assumption that it has this power is actually delusional.

And it came out— it came out when I was a young, young person. I still hadn't even started my first company, which I started at age 12. I wasn't 12 when it first came out, right? It was '72. Is that right? Okay. So it's been around almost as long as I've been around.

And they did it without legislative approval, which again, they did it without notice or comment.

Without notice or comment. Right. Okay. So, so this is absolutely crazy that they did it without notice or comment. They did it somewhat without, I think, legislative approval is his argument.

Well, they didn't even go to Congress at all. Do you know why? Because no, Congress itself could not say, and this is a really important part.

This is important.

Congress itself could not pass a statute that says if the government charges you with something and then you want to settle a case with the government, you must agree to be gagged for the rest of your life. Number one, Congress itself could not enact such a law. It would never get out of committee. If it did, it would never pass two houses of Congress. If it did, it would not be signed by a president who understood the Constitution. And even if it went through all of that, it would be set aside in court in 2 minutes.

It would. It would be set aside in court. And that's the important part, is that it would get up to the Supreme Court and it would be like, no, in the district court.

And we know this happened. I'll tell you what, back in the 1990s, there was a judicial discipline statute that for the first time said the judge who gets disciplined can't talk about his case. He took that to a district trial court, and they wrote a 2 or 3-page section of the brief as to why, of course, he can talk about his case. You can't stifle a judge. And one of the arguments I have made to the courts is that's the correct outcome. Why are you judges now refusing to accord the same First Amendment rights that you know you have and denying them to others who have settled their cases with the government? That's a hard question for a judge to answer.

Oh, it's terribly hard. I'm going to go back to this because Jackie was in here. So we start this conversation and literally we've been in this for now 4 years. At one point we get a surprise that we're told, hey, We're moving into— oh, they said either you need to sign a tolling agreement, which means you're going to let us go past statutes of limitations, or we're going to slam you hard tomorrow. Right. I mean, and that's what they said. And they said, and then we're going to— but if you— once you sign that, we'll enter into an agreement about how we'll negotiate or how we'll settle. And by the way, there's a couple of different terms. So this is where I was going with the criminal thing. There's what's in the legal world of securities they call Big F. F of fraud. And so if I'm accurate in this, Jackie, do you remember what they said big F was? Because that's the easy one to describe, right? What's big F in securities law?

In layman's terms, it's an intent to deceive.

And it's actually— you committed a crime. It is something that the DOJ may be coming after you, or an attorney general, or somebody else. And instead of just having monetary penalty, you could lose your liberty, right? Which means in any case with that, you are afforded a jury trial because the Constitution says that. Little f, which also uses the word fraud and doesn't have an asterisk next to it, which it should, which it should, it should even have a different word in there, is also thrown around by the SEC and other agencies, by the way. And it says fraud, but you could do fraud because something in a piece of paper you handed a customer may have had an inaccuracy.

You don't have to know it had an omission, a material misstatement or an omission. If you omit something, even if it's not intentional, even if you believe it's not material, even if you believe you've covered other aspects of that topic through additional disclosures, whatever, if they, in their subjective opinion, determined that you made a material misstatement or an omission, that is little f fraud.

Little f fraud. And so this brought up then, uh, all of those words seem like, yeah, most educated people are going to be able to get that. It brought up a word that is Latin, which is— and I never say it right— it's scienter. Cienter. And so our attorneys immediately say, so we'll do this, but it's going to be a non— so it's a negative to start with, non-scienter filing, which means Mr. Powell didn't have any knowledge of anything that he was doing was wrong. So that's the first part of this. And so that was always the argument within the settlement that we're going to get in there, that there was never an intent. And by the way, there was a long list like 97 people in this. And the other thing that Mr. Powell said was, all these people go away, period. They'll take the hit because he's a CEO, didn't do this individually, but all the other people go away and just stop that, this ridiculousness. They agreed to that in both cases, right? But what do they throw into that document? Peggy, you saw it in the settlement. They then throw another little asterisk caveat that says It is non-scienter, non-scienter, except for that you should have known or should have possibly known or could have known if you would have done X, Y, and Z. So this still makes you a bad actor for the rest of your life, right? So it almost converts it back into a big F even though it's not.

There's so much deception in those documents. Um, that's, uh, the prime example. But it was also that you're supposed to be on a no-admit basis. And yet they tell you you cannot deny anything in the complaint. And that even if you publicly say, well, I didn't admit to it, you were forced to say, but I didn't deny it either, which is very incriminating. And they know it. And this is withheld speech.

Oh, sorry, Jackie.

No, I was just saying there's a great question in the chat, but I didn't want to interrupt you if you wanted to make another point.

No, I mean, we're just kind of riffing on this kind of stuff because it's helping clarify the scenario where we're going through these conversations, right? And the, the, the group that we had is our securities counsel, which is outside of Jackie as our general counsel, and the team of lawyers that we had working within our company. Um, again, they're going through this with good intent of negotiation, and they're told, okay, so you're going to have a this Latin word that says you didn't know anything about it, you didn't purposely do anything wrong, and we're actually not even going to say you did anything wrong. You're just going to settle this and make it go away. It's like, cool, that's great. We sign that, we go forward, right? And then it took another year to actually get through the agreement because none of it looked like it. And here's the last part, and then we'll go to Jay's question or comment. So part of what we were talking about was we were going to put this thing on our website for 3 years. We were willing to put the SEC settlement on that. They could go to the SEC, but there was not supposed to be a press release from the SEC, and therefore we wouldn't have to worry really about what our side of the organization would say. There'd just be an announcement. We'd have to be doing it in all of our disclosures everywhere along the line that we settled with the SEC on this, and that would be it. And the day of the deal, the day it actually gets signed by the commissioner, the SEC comes out with a wrong, onerous, had nothing to do with any of our agreements statements. And yet I'm not able to say they're wrong or onerous or anything else. So even by saying this now, it could open up my case because for the rest of my life I'm not able to say anything about what we're supposed to be doing. Is that reasonably accurate?

I, I disagree that you've opened yourself up. You simply described the procedural mechanism and the agreement that you made and the fact that the press release was contrary to, to your agreement. That's not, uh, that's not getting to what the charges were.

Jackie's through our, through our group. Jackie threw our group the day it came out, did the correction back to the newspaper and said, that's not accurate, and immediately, like, pick up the phone, immediately the SEC's on the phone to our counsel on the retraction and said, you can't do the retraction, you can't, you have to actually retract your, your comments.

Outrageous.

Isn't that crazy?

Yeah, it's just outrageous, and, uh, it's in— it's done in bad faith. Um, the government should be, um, gravely, um, criticized for doing— for carrying on its business in this fashion. It's unethical, it's underhanded, it's, um, contrary to their oaths to support and defend the Constitution, which every single one of those people you are dealing with in any power in the agency is required to adhere to the Constitution in the exercise of their duties.

Well, and I think this leads into Jay's comment. Not only that, these guys have a different level being created, you know, after the 1929 crash, right, to say, hey, we need stable markets, we need to be able to trust our markets. And so this agency set up— I do not disagree with specifically having an SEC. Out there because Congress generally doesn't know enough to write the rules. And there should be some intermediary federal regulator at the federal— you know, we can go into those debates on all sorts of different levels, but they're supposed to make the markets available and stable for investors and for the free enterprise of the United States to grow and prosper. And to Jay's question, here's Jay Miller's question: How do you advocate for integrity when it's common practice for a court to call anything on the record as fact when it's simply what representation for either party gets recorded. It's at the root of what's wrong with the system the public and many investors aren't aware of. However, we weren't up until Jarkasi and the Chevron case, which you guys helped get that through here over the last 24 months, which if you don't know those cases, go out there. These aren't even in courts of law. They're in administrative courts, which are through judges that are hired and are employees of the SEC. And the SEC is represented by its internal counsel, which are also employees of the SEC, and it gets not adjudicated, it gets heard in an administrative court, right? Up until—

I want to add to that, Tom. We've had other people who have tried to take the SEC order, those who I would call ambulance chasers. They take the SEC order and they wave it around like now they've got facts to go start a different suit. One of our go-to, you know, statements is, hold on, you can't do that. These are not findings of fact. These are not facts that have been adjudicated by a court of competent jurisdiction. A court of competent jurisdiction can make findings of fact when two parties have presented facts to it on the record, and then the court will go ahead and make findings of fact. That is not what happened here though. And so when people attempt to use the order in that way. Peggy, I'd love to hear your thoughts because I'm sure you've got other clients and you've seen this plenty of times where someone will wave around an order on an either admit nor deny basis and say, these are facts.

This is one of the core deceptions of the settlement process is they tell you it's on a no admit, no deny basis. And one of the reasons you agree to that is if they insist upon admissions, then the class action bar will be chasing you for follow-on kinds of opportunistic lawsuits. And so you're reassured, this is no admit, no deny. And yet they go on to make you sign that you will not contest any allegation of the complaint, which is— and this actually happened in litigation, you'll be sure, Jackie, that in one of my first cases I challenged the rule, and the district judge who had accepted the consent order heard the case. And the SEC came in and they said that my client, Barry Romeril, had violated the securities laws, and he had been convicted of— not convicted, but found to have been in violation, etc. I came back in my reply brief and I said, Wait a minute, he settled on a no-admit, no-deny basis, and here you are, SEC, saying he was found to be a securities law violator, and you, the judge, are not objecting to the fact that you entered a settlement that said it was no-admit, no-deny. Now, I will say this, the SEC never tried that with me again in our subsequent litigation. But they had so much chutzpah that they would actually say to a judge who had entered a no-admit statement that no, he had in fact violated the securities laws. That's outrageous. That's a violation of the attorney's oath to present honest and fair presentations to the court that do not conflict with the record.

I think that that is just crazy from that standpoint, that again, going through law school, you take the oath, you're supposed to always deal with integrity. Yet when you are employed by the U.S. government, part of what does happen is that they don't always have to represent theoretically because their employer's saying use every dirty trick you possibly can, and it's a civil settlement, right, type setup. And that's the difference of what I think most people don't know The difference between a criminal and a civil settlement. So if your car gets hit or you hit someone in a traffic accident and it wasn't intentional and there was no form of criticalness in there, or criminal activity in there, it's two attorneys battling back and forth and you come to a settlement and that's it, right? Or if you're in an employment situation and you come to an agreement that you're going to exit the employee or they're going to exit and you have a, hey, neither of us are going to talk disparagingly about this. Those are settlements in a civil matter.

Well, also, very importantly here, Tom, those also are between private parties who are not bound by the Constitution.

Correct.

It's one thing for an employer and an employee to agree on a confidentiality clause, which, by the way, the FTC says that even there, the non-disparagement clauses are unfair trade practices. So, but moving on to the situation where the government is one side of the party, the government is forbidden, it is constitutionally disqualified from violating your First Amendment rights in such a proceeding.

Well, and let's even go back to that, 'cause some people may or may not know, I teach federalism at the doctoral level for Northeastern University, right? So constitutional law, I have a doctorate in law and policy, And the main thing that most of the time, so we were talking about the lemon pound cake, right, scenario, that's free speech before it was against a government person. It's actually oftentimes thought of free speech between two people that you can have freedom of conversation, when really James Madison and the founders were putting this together and saying, we need to have a model where the government given unrestrained power will always act in a bad manner, oftentimes will defer to bad actions. And so you need to have checks and balances. And the First Amendment is about calling out the government and speaking out against when the government behaves poorly, when someone who is working for the government, who represents the government, who, i.e., is the government because they bring that power of the U.S. government, That First Amendment is about being able to say, this is how they behaved, and this is not accurate, this is not okay, this is— and that again was our pound cake scenario, right?

Well, the pound cake is a little bit different because those were sheriffs or law enforcement officers that were suing the guy for being critical of him. Here, you have to consent ahead of time that you're going to be bound and gagged. It's actually worse. Um, because you, you can't even get before a jury, um, on this issue.

It doesn't— you wouldn't think it, but huge extreme financial pressure and time pressure and aging, as you and I had talked about during this process of becoming gray and having my granddaughter born and raised during this period of time and all the stuff that goes on, it's an incredibly stressful time. We've known some people have taken their lives during this time, or they become alcoholics, or all the various things that can happen through that. So the undue pressure on this and the time to get it over. The government has unlimited resources and unlimited time other than statute of limitations, right? So Jackie was there. Jackie, we're sitting there and it's like my family is begging me to take the settlement because they just want it over. They're worried about me as part of it.

Not only family, but I think there was so much pressure at that time. Again, informed by the information you have and what's in front of you, And I remember several conversations where the SEC was using its enforcement power as leverage, basically as a thinly veiled threat. If you don't take this settlement, we will pursue an enforcement action. You will spend X number of years and $10 million more to fight this.

And not have any other time. They will be focused basically solely on this. No building businesses, no helping entrepreneurs become new, you know, newly minted successful businesses. All the thousands of people that get employed through the capital that was raised, all of that was significantly there. And so why I say about the pressure, we watch movies where the officer is in the, uh, interrogation room and has beaten the crud out of the person on the other side and then puts a, uh, you know, and here is your confession and sign this. And they even called it jailhouse confessions, and they've been deemed not proper, not allowable type scenario, right? Because there's undue pressure. I argue that when you have millions of dollars or any money on the line and it's your reputation and the time that's gone in and then it says you must sign this or we're going to do that, that's a jailhouse confession, right? It's not a free will.

It's a, it's a culture of coercion. And as I said, the, the document that you signed that's called your offer of settlement is anything but your offer of settlement. They write the entire thing and you cannot negotiate any provision of it. And for a government to behave in that dishonest fashion is deeply troubling.

It is.

The other thing is it's just the SEC that does this, or was. And then about, I'm going to say, 20 years after they started doing that, the CFTC said, hmm, SEC's got that little gag rule. We want one of those, right? So they did it. But now it's only two agencies in the entire United States that do this. The problem is if we do not get this before the Supreme Court, People are going to look at that Ninth Circuit decision and they're going to say it's a license to gag, and across agencies, and that's why this is so important to get before the Supreme Court. We've had two judges call it a plain prior restraint. Floyd Abrams' daughter is a judge in the Southern District of New York. She wrote a wonderful opinion about why this violates the First Amendment. Hester Peirce, who is a current SEC commissioner, wrote a dissent from the denial of our petition below, saying the SEC needs to give up this rule. It violates the Constitution.

So, so speaking out there, I mean, if you haven't read Overruled by one of our justices, I mean, it really goes into about where there's too many laws that are punitive against our citizens that make it— and through the settlement processes and other things. And then, as you said, Amy Coney Barrett on her book as well, Right. So our justices, how does that— let's talk about this because this is kind of interesting. Then we'll get back to securities. 4 of the justices have to say, yes, we'll listen to this case. Right. It's not just you appeal to the Supreme Court, you have a great case, whatever it may be, majorly important to the people, but they actually get to say yes or no if they even want to hear the case.

That's true. And a very low percentage of cases get granted cert. We think we have an excellent case here because of the blatant First Amendment violation. As you say, even criminals can talk about their cases, and the Supreme Court has said that. The Ninth Circuit did not follow the Supreme Court. The Supreme Court has also been quite clear this is an unconstitutional condition. Again, the Ninth Circuit did not follow that precedent, and this affects thousands of people over decades. That's the kind of case that the Supreme Court needs to take it, pay attention to. We think it's an excellent cert petition, and for those reasons, we think it must be granted.

Well, you guys have done an amazing job. Gary Pryor, by the way, you may recognize that name, has popped in a question in there. It says, do you or do, do I or you or Jackie— so this is one of our trivia questions, I guess— know when the SEC Enforcement Division started enforcement actions against Reg D private placements, private companies versus just public company oversights?

Well, isn't Reg D a function of the JOBS Act?

No, it was pretty— it's much older than that. We were doing—

I think it was, um, uh, Dodd-Frank. Okay, 2010. Um, because before that, these administrative law judges were used for really pretty minor offenses, registration things. It's not a great system, but the stakes were not particularly high either. Then Dodd-Frank gave them the power to go after people for, you know, very punitive and life-altering securities charges. And that is why Tom was in such a terrible position, because he was internal in the SEC where he The SEC is the prosecutor. In many cases, they are making up rules, so they're the legislature.

They're making up stories.

The judge, the jury, the penalty decider. And then if you want to appeal your case, you have to take it to the commission, which is the very entity prosecuting you. There's no possible way that passes constitutional muster. But that's where you were, Tom. You were in an administrative proceeding where you did not have a chance of success.

And by the way, the current, current commissioner, current chair, has said basically they're not going to do that anymore, along the lines of the deal. So we'll see if that actually— but that's the problem, is, is why we're taking the Supreme Court. And some of my other people, um, that are in this said, well, gosh, you know, with the current administration, maybe we could get an executive order and waive this and da da da. I said, that's not great, because the only way it becomes permanent so we show that this was unconstitutional is by having SCOTUS or the Ninth Circuit if they would have done it, but say, yes, you government, you cannot behave this. It's the restraint of the government that as an individual, as a group leading this, you know, overall individuals. And the question we always come back to is, so what? How does this impact the small business people? We have a lot of founders that are out there looking to raise capital. Why is this case make a difference of how they'll be able to raise? And you can even go back to Jarkasi or Chevron. How does that make a difference of what the work you guys doing at NCLA, how does that impact free enterprise in this country?

Well, among many other things, if the SEC or any agency, but since we're talking about the SEC and they have the gag rule, I'll confine the discussion to them. If they have a new theory of what they should be regulating, or if they have a retroactive theory, in the case of Ray Lucia, And also Christopher.

Poor Ray's story. You got to tell Ray's story.

I mean, it's even the commission, when he appealed to the commission, 2 out of 5 of the commissioners said his ALJ was making up a rule out of whole cloth and applying it retroactively. That's not unusual. And what's really troubling is they don't bring those sketchy, edgy probably totally weak cases against the big securities firms. They know that they bring it against the little guys. We call that low-hanging fruit.

They also don't name the CEO, you know. So if you go through and you look at the SEC fines, every single major company has received some fine at some point through enforcement or other thing, pretty much. I mean, maybe there are some exceptions, but you can go see, you know, Warren Buffett, Berkshire Hathaway has it, and everybody, you know, is like, oh, they're great. It's like, no, Warren Buffett has a great quote out there that says, if the police officer follows you for 500 miles, you're getting a ticket. And that comment was actually made about Jamie Dimon, who is the, you know, just poster child of people that people think is a great person. They get fined, right?

Absolutely.

But they don't get the personal name.

Exactly. And, and, and that they can also afford it. It's cheaper for them to just pay the fine and move on because it's not personalized, as you point out, and they have the resources to just buy off the regular And it was far—

we were spending $75,000 a month. So for me to settle for $75,000, that was one month's legal fees for us. So for me, it's an economic determination. That's what we decided. And it was a time to end the stress on that. And we were argued about how we could take that forward. That's why this makes sense.

Well, and Mark Cuban fought the SEC right to the end. He paid millions upon millions of dollars, okay? And a jury completely exonerated him. That, and the Harvard Journal on Governance said nobody could see much of a case at all against Mark Cuban, but they forced him to spend many years and many, many millions of dollars. A gentleman named Nelson Obis, who was, you know, a better, more well-heeled than the average American. He also fought his way to a jury exoneration. It took him 12 years and $12 million. Nobody but the ultra-wealthy can fight this, and that should be a matter of great concern to the Supreme Court, because what the SEC does is they charge the smaller entrepreneur, the smaller founder, with these very often fabricated or very weak charges and the low-hanging fruit, and then they bully you into a settlement after, you know, extracting, putting you at the point of bankruptcy very often. In fact, Mr. Novinger, one of our co-petitioners, did have to declare bankruptcy as part of that settlement process, and judges have recognized that people are on the brink of bankruptcy when they settle. Then what they do is they put together a binder of settlements and they say, well, next guy. Well, so-and-so, you know, Mr. Novinger or Mr. Lucio settled for the same thing and it took them how many years? So they start to build a book of what we call regulation by settlement, okay, or regulation by enforcement. Very often, all too often, The theories upon which these cases are brought, or the factual record upon which they are brought, are either weak or nonexistent. And that—

well, this is how they get— this is how they get promotions, which include, you know, raises in title, raises in compensation. There is some really good arguments out there. And we say in private enterprise, you show me the compensation plan and I can show you the behavior of your people.

Well, here's how—

that's the incentives. And so the incentives of enforcement are to be able to bring these actions, whether they're frivolous or not, get them done, get them on the books, and show this win by the SEC. Not that it's making an impact, it's that it's winning, right?

And here's how the gag plays into that. If they were actually forced to be in a real court before a real judge or a real jury, And we're bringing these weak or nonexistent charges. We know from the Cuban case and Mr. Obis's case, they could lose, right? But because they know they can force you into settlement, and by their own data, 98% of people charged by the SEC settle, they know—

Hang on just a second. Let's just get to that. If someone settles, generally, they can't take it to adjudication, which means the court of law never actually rules on it. That's why they can continue to do bad behavior.

Precisely.

Is a big part of that.

People will be gagged. So there is no check on their power to overcharge, overregulate, make up regulations, apply them retroactively because they know that 98% of the people they do that to will be silenced for life.

And then there's the other 2% that are crazy enough like me and Gary and the others that are part of our group in this scenario to actually take this fight on and live it. But it is such a small percentage. And it's really because of the NCLA that we're able to do this along with the others that are, that are writing our amicus briefs and supporting us in there. But it's still great work that you guys are doing. I'm going to take it aside. We're a little bit over what our normal time is, Peggy, on there. Jackie, while I'm showing up the things, can you share from your perspective, because you were internal But in nowhere was it necessarily saying your name. It was our team and our company and all the things and all the people that were going through this. Can you explain that a little bit? And while I'm doing that, I'm going to pop up NCLA's and Peggy's sheet, or actually, I guess Angela is going to do that and we'll have that where you can get the QR codes and follow some of the YouTube videos out there. But Jackie, how did this impact the employees and the team members of a company that had over 50 professionals, more than $1 billion in assets under management of multiple companies and all those different impacts? What was this one one simple decision by an enforcement agent to basically take this forward?

Yeah, well, we were in the investigation. It was just very distracting, and it's very, um, it's, it's nerve-wracking. You think you've done something wrong despite your entire team working very hard. Like, we were, we were really big on compliance. We had a huge compliance department, a huge legal team, a huge QC, uh, quality control department, and you're working really hard to make sure everything's done right, but then this is kind of hanging over your head. And then afterwards, it— the company couldn't go forward. That was the end. So all of those people had to be let go. Um, many employees hung in there and were deposed, had to be deposed as part of the process, which is no fun for anyone.

Miserable experience.

Yep.

And they know it.

Well, they know it.

Yeah. Thank you, Maggie. This is invaluable. We've been getting a lot of good comments too. Thank you for the audience engagement. Um, if you didn't get those QR codes, there will be a replay and you'll have another chance to grab those. There's a lot of content, um, online videos especially, and you'll be able to kind of track the progress of this. Thanks, Angela, for throwing them back up.

Yeah.

Um, as we proceed and hopefully get the Scotus's ear.

So Peggy, you've been doing this and I can't tell you how much I appreciate working with you. You're brilliant. Uh, I did have an opportunity to travel to Hawaii with you to be in front of the Ninth Circuit, which was super cool. And my two of my granddaughters were there dressed as the— what's it, Legally Blonde scenario— in the, in the pink, carrying the briefcase in there. The justices thought that was super cute when they came walking into the courtroom. It was a, it was a cool experience. But this is amazing to be doing this. Just briefly, tell me the, the work of the NCLA, what you guys do and what the purpose of it is, because it's really fascinating work.

Well, the Constitution doesn't even contemplate an administrative state, okay? There are 3 branches, not 4. 3 branches of government, not 4. And what, um, what our work concentrates on is on the unlawful exercise of agency power. The agencies have gotten out of hand. They were there to administrate the laws that Congress passed. But here, Congress passed no law saying they could gag you, right? Right. They just did it on their own without notice and comment, and that's a perfect example of agencies getting beyond their power. Our victory in the Chevron— getting Chevron overturned involved fishermen, herring fishermen in the Atlantic, who the government wanted to put monitors on their boat, which was fine, They believe in preserving the fisheries as much as the government does, but Congress refused to appropriate money to pay the monitors. And so the agency said, you have to pay for the $700 a day for the government monitor on your boat. There's no law that says they can do that. And these— the fishermen's profit margins are very tight. This, this is the difference between a boat being successful or not. and that case won at the US Supreme Court, but on remand, the district judge said, I still think there's power for the agency to do this. So it's a very long and hard-fought journey to do this. The Jarkasi case, again, tries to preserve your right to the jury, because what we are finding, as held true in Mr. Obis and Mr. Cuban, Mark Cuban's case, is you get these weak cases before a jury, they toss them right out. Lemon pound cake, man. Tossed him right out. A jury is much less inclined to give credence to everything the government does.

They don't like seeing the government behave badly, but most people, because if you settle 98 out of 100, nobody ever gets to see how the government's playing because it doesn't ever get adjudicated. It never gets in front of a judge, a jury.

The separate branch of government in the judiciary is so important, which is why we have opposed the administrative adjudication. And we won a big case at the Supreme Court for Michelle Cochran, which allowed her to go to a real court and say, these administrative law judges are biased, and they are not— they are subject to too much agency control, and we need to get into a real court of law when we are being charged by the government with what can be essentially criminal penalties in terms of the size and their impact on our lives.

Well, I think it was, I think it was Ronald Reagan's quote. I think it's been out there a number of different times, but it was that when someone goes in front of a judge in Russia, in the Soviet Union at the time, but in the Soviet Union, it's always a guilty because the judge works for the government and they're not going to go against the government, right? And same thing in other countries. And we think that we've got this system that that doesn't work, but in the ALJ side, it is that the judge works for the commission or whoever that group is.

Well, and I have to bring this back to the gag too, because you were forced— you tried to negotiate the gag out of your settlement, as did Cassandra Torian and Ray Lucia and others, and they forced you to sign a piece of paper that said, 'I consent to be gagged.' They do that after struggle sessions in China They do that in the old Soviet Union where you sign a consent, a confession, because you have to. When I first learned of this rule, I could not believe that this could happen in the United States.

I would agree. I would agree. Well, Jackie, thank you for again being here. And thanks for being general counsel at our company and the Founders Law Group that we do. And we love the good side of this, the upside of this for our own company. Is it just brings our insights to a whole new level because it's not academic. We have lived through these things. We've seen how it's impacted. We've learned how it touches other people. And we do that. And some of the questions that I saw is like, how do you utilize AI to better do these? These are all fantastic questions and we'll bring some of those to future Lunch and Learns. Specifically, Peggy, I've got to say thank you for putting up this fight. Thanks for being my advocate for me personally. And I'm so thankful for NCLA and the team and the and the work that you guys do and for taking time out here and being on the Roadshow. You're on every show. I can see you like it's like 60 Minutes is going to be next, right? We're going to get this in the human interest of 60 Minutes.

It needs to be. All right.

Well, thank you. And thank you. We'll see you guys next week. Thanks, Angela, for putting this up. And everybody have a great week. Have a great day. Thanks, Peggy.

Bye.