SEC, DOJ May Suffer Lingering Effects From Recent Federal Government Shutdown
White-collar lawyers at Akerman cited backlogs and delays at agencies, but they also expressed concern about possible long-term damage if experienced government lawyers and other employees decide to leave public service as a result of federal appropriations lapses and shutdowns.
February 05, 2019 at 02:11 PM
6 minute read
The record federal government shutdown that affected 800,000 employees—which could resume Feb. 15—may have lingering effects at the U.S. Securities and Exchange Commission and the Department of Justice, as well as a long-term impact on hiring and retention at enforcement agencies, some white-collar attorneys said recently.
“Some initial public offerings were reportedly slowed down because of the shutdown and from an enforcement perspective, many investigations had to be temporarily halted because they [personnel] weren't permitted to show up for work and couldn't take testimony,” said Douglas Paul, a former SEC branch chief in the enforcement division, and a partner in Akerman's white-collar crime and government investigations group in Washington, D.C.
But Paul also expressed concern about what the 35-day partial shutdown “does to the morale of individuals at SEC and DOJ and other enforcement agencies and whether people want to remain at the agency or switch as shutdowns become more of a political issue than a funding issue.”
“The concern is that three or six months down the road you might see an exodus that might really hurt,” he said.
In statements posted on its website, the SEC said it plans to work through its backlog of filings, submissions and requests for staff action based on the date they were submitted, but that responses to questions may take longer than normal. The backlog could be exacerbated by companies rushing to make new filings in the window before Feb. 15, when the temporary deal between the president and Congress expires.
Government employees working without pay numbered 450,000, and another 350,000 were on unpaid furloughs, during the shutdown that started Dec. 22 and ended Jan. 25, according to the American Federation of Government Employees, the largest labor union representing federal workers. During that period, the SEC operated with an extremely limited staff of about 285 individuals, primarily to monitor markets functioning and cover emergencies. The vast majority of SEC staff was furloughed.
SEC Chairman Jay Clayton issued a statement Jan. 26 saying that the commission had resumed operations with normal staffing and their 4,500 employees had returned to their posts in Washington, D.C., and 11 regional offices. On Feb. 4, the commission had no comment in reply to a request for updated information about backlogs or other repercussions, but cited a statement on its website that “the Securities and Exchange Commission is currently open, fully staffed and focused on our mission.”
The Justice Department also resumed operations in late January after the appropriations lapse. Members of the FBI Agents Association, a professional organization, had complained during the shutdown that some FBI investigations had been severely hampered, despite the fact that many personnel were working without pay. Members said that the agency had been unable to fund confidential sources in counterintelligence and counterterrorism operations or pay for operational travel on narcotics probes, for example.
On Tuesday, an FBI spokesperson said in an emailed statement that “all FBI agents and support personnel in field offices were considered excepted from furlough. At FBI headquarters, certain personnel were designated as excepted from furlough to provide direction and investigative support to all field operations and select headquarters functions. Following the shutdown, all those who were furloughed returned to work and everything resumed completely.”
The FBI and DOJ continued making some high-profile cases during the shutdown including the money laundering and trade-secret theft indictments of Chinese telecom manufacturer Huawei, which were announced Jan. 28—just two days after the shutdown ended.
FBIAA spokesman and Bracewell senior principal Paul Nathanson said on Monday, “I have not heard of any residual effects from the shutdown. We remain concerned about the possibility of another shutdown, specifically the impact on agents and their work.”
Nathanson also referred to a statement by FBIAA president Tom O'Connor at a news briefing during the shutdown, noting, “working with no pay is forcing more agents to consider leaving the FBI for the private sector. The loss of current and future agents creates a long-term problem that will reverberate throughout the FBI for years.”
Akerman partner Michael Kelly joined Paul in saying damage to the DOJ and the SEC might be worse than is readily apparent if the specter of more politically motivated shutdowns causes experienced government lawyers to throw in the towel on public service careers.
“Experienced career prosecutors play an important role at the Department of Justice. They are often brought in to handle some of the toughest cases, and they have to make very difficult judgment calls,” Kelly said. “If the Justice Department will be losing some of these prosecutors because they don't want their pay held hostage to shutdowns, that is not a good development for anyone in the federal criminal justice system.”
He also said that the loss of a lead prosecutor will sometimes result in an investigation being scrapped if others in the government don't share the same view of the case's importance.
Paul urged the federal government to undertake a study in six months to track whether there is an exodus from the agencies or problems with recruitment in the shutdown's aftermath.
Read more:
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View All'Parting Shot': SEC Issues Wells Notice to Immutable Ahead of US Election
3 minute readDapper Labs $4M Settlement, $1.3M in Attorney Fees Reveal NFT Settlement Trend
4 minute read'Major Change'? 6th Circuit Steps Into Fight Over NLRB's Expanded Money Remedies
Trending Stories
- 1Infant Formula Judge Sanctions Kirkland's Jim Hurst: 'Overtly Crossed the Lines'
- 2Abbott, Mead Johnson Win Defense Verdict Over Preemie Infant Formula
- 3Preparing Your Law Firm for 2025: Smart Ways to Embrace AI & Other Technologies
- 4Meet the Lawyers on Kamala Harris' Transition Team
- 5Trump Files $10B Suit Against CBS in Amarillo Federal Court
Who Got The Work
Michael G. Bongiorno, Andrew Scott Dulberg and Elizabeth E. Driscoll from Wilmer Cutler Pickering Hale and Dorr have stepped in to represent Symbotic Inc., an A.I.-enabled technology platform that focuses on increasing supply chain efficiency, and other defendants in a pending shareholder derivative lawsuit. The case, filed Oct. 2 in Massachusetts District Court by the Brown Law Firm on behalf of Stephen Austen, accuses certain officers and directors of misleading investors in regard to Symbotic's potential for margin growth by failing to disclose that the company was not equipped to timely deploy its systems or manage expenses through project delays. The case, assigned to U.S. District Judge Nathaniel M. Gorton, is 1:24-cv-12522, Austen v. Cohen et al.
Who Got The Work
Edmund Polubinski and Marie Killmond of Davis Polk & Wardwell have entered appearances for data platform software development company MongoDB and other defendants in a pending shareholder derivative lawsuit. The action, filed Oct. 7 in New York Southern District Court by the Brown Law Firm, accuses the company's directors and/or officers of falsely expressing confidence in the company’s restructuring of its sales incentive plan and downplaying the severity of decreases in its upfront commitments. The case is 1:24-cv-07594, Roy v. Ittycheria et al.
Who Got The Work
Amy O. Bruchs and Kurt F. Ellison of Michael Best & Friedrich have entered appearances for Epic Systems Corp. in a pending employment discrimination lawsuit. The suit was filed Sept. 7 in Wisconsin Western District Court by Levine Eisberner LLC and Siri & Glimstad on behalf of a project manager who claims that he was wrongfully terminated after applying for a religious exemption to the defendant's COVID-19 vaccine mandate. The case, assigned to U.S. Magistrate Judge Anita Marie Boor, is 3:24-cv-00630, Secker, Nathan v. Epic Systems Corporation.
Who Got The Work
David X. Sullivan, Thomas J. Finn and Gregory A. Hall from McCarter & English have entered appearances for Sunrun Installation Services in a pending civil rights lawsuit. The complaint was filed Sept. 4 in Connecticut District Court by attorney Robert M. Berke on behalf of former employee George Edward Steins, who was arrested and charged with employing an unregistered home improvement salesperson. The complaint alleges that had Sunrun informed the Connecticut Department of Consumer Protection that the plaintiff's employment had ended in 2017 and that he no longer held Sunrun's home improvement contractor license, he would not have been hit with charges, which were dismissed in May 2024. The case, assigned to U.S. District Judge Jeffrey A. Meyer, is 3:24-cv-01423, Steins v. Sunrun, Inc. et al.
Who Got The Work
Greenberg Traurig shareholder Joshua L. Raskin has entered an appearance for boohoo.com UK Ltd. in a pending patent infringement lawsuit. The suit, filed Sept. 3 in Texas Eastern District Court by Rozier Hardt McDonough on behalf of Alto Dynamics, asserts five patents related to an online shopping platform. The case, assigned to U.S. District Judge Rodney Gilstrap, is 2:24-cv-00719, Alto Dynamics, LLC v. boohoo.com UK Limited.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250