In September of 2012, Kevin James O'Rourke of Del Mar's Pacific Capital Management was sanctioned by the Securities and Exchange Commission (SEC) for putting investors in a San Diego software firm without informing those investors that he was taking a 10 percent success fee.
Also, said the SEC, O'Rourke solicited investors to put money in a fund that would have most of its investments in that software firm without their knowledge. Again, said the SEC, O'Rourke did not inform those investors that he was taking his 10 percent cut.
He was slapped with a cease-and-desist order and ordered to pay a fine and disgorgement of more than $600,000. According to his attorney, San Diegan Gary Aguirre, 24 affidavits from investors showing that the disclosures were actually made were not allowed into evidence.
There were 40 investors in all; 3 claimed they were misled. Aguirre says that the SEC relied mainly on one person to build the case. This person had sued O'Rourke in superior court and the case went to arbitration. He lost in arbitration so took his argument to the SEC, says Aguirre.
But now the SEC is in turmoil amid charges that certain administrative law judges were not constitutionally appointed to their posts. One of those judges is Cameron Elliot, who handled the O'Rourke case.
According to a story in the Wall Street Journal, certain judges within the SEC "are inclined to give the SEC home court advantage," says Aguirre. In one unrelated case, a former SEC administrative law judge was told by the chief judge that the burden of proof was on the accused persons, who had to prove they didn't do what the agency said they did.
In the United States, people are innocent until proven guilty, not the other way around, says Aguirre. On Thursday (October 29) Aguirre filed a suit against the SEC, asking for numerous documents pertaining to cases that were handled by judges who may not have been appointed in compliance with constitutional and applicable statutes.
Aguirre, a former SEC senior counsel, won a $755,000 wrongful termination suit against the agency.