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Huge Civil Penalty Imposed on Respondent in SEC In-House Proceeding

By Jeffrey T. Petersen, Esq.  of Shustak Reynolds & Partners, P.C. posted on Wednesday, October 7, 2015.

James J. Reynolds

James J. Reynolds


Laurie Bebo, the former chief executive of Assisted Living Concepts, Inc. was hit with a $4.2 million civil penalty today after the SEC administrative law judge ruled that she had engaged in a fraudulent scheme by falsifying occupants at some of the company’s senior citizen residences to avoid defaulting under certain facility leases the company had.

The SEC administrative law judge found Bebo’s testimony in her defense to be, among other things, a “fairy tale” and an “elaborate fiction”.

We have been following the Bebo case due to her challenge to the constitutionality of SEC in-house court proceedings. She recently lost her appeal on that issue in the 7th Circuit, and has subsequently sought reconsideration of the appellate decision, such request which is still pending.

The imposition of such an enormous civil penalty highlights the concerns defense counsel, and individual respondents, have with the SEC’s internal court system, which places respondents on trial within months before an in-house SEC judge with limited discovery in hand. The prospect of facing significant financial consequences on such an expedited basis has led to the great number of challenges to the SEC’s system this year.

Jeffrey Petersen, Shustak & Partners, P.C. Shustak & Partners, with offices in California and New York, focuses on financial services law and represents broker dealers, investment advisers, registered representatives and high net worth investors. Jeff can be reached in San Diego at 619.696.9500.



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