Here’s a cautionary tale about the lack of oversight of administrative law judges and the limitations of accountability journalism.
A few weeks ago, George Painter, a long-serving administrative law judge at the Commodity Futures Trading Commission, made an extraordinary allegation. In a letter announcing his retirement, Judge Painter said that his colleague on the bench, Judge Bruce Levine, had entered into a secret agreement with former CFTC chair Wendy Gramm to rule against investors in every single instance.
And he said that in nearly 20 years on the bench, Judge Levine had done just that.
Judge Levine, “in the cynical guise of enforcing the rules, forces pro se complainants to run a hostile procedural gauntlet until they lose hope, and either with draw their complaint or settle for a pittance, regardless of the merits of the case,” Judge Painter wrote.
The CFTC, which regulates futures and options trading, is one of a large number of federal agencies that employ administrative law judges. The judges hold hearings, take testimony, and issue rulings in disputes between the agency and the companies and people it regulates.
If it seems hard to imagine that one judge charged with protecting investors could rule so one-sidedly for so long without notice, well, that’s because it is.
Ten years ago, the Wall Street Journal published a 2,728-word front page story about Judge Levine. The headline: “If You’ve Got a Beef With a Futures Broker, This Judge Isn’t for You – In Eight Years at the CFTC Levine Has Never Ruled In Favor of an Investor.”
Woe to the investor who draws Judge Levine, the story says. With the exception of a handful of cases in which defunct firms failed to defend themselves, the judge ruled in favor of the commodity broker in every one of the 180 cases heard over eight years. The story says that judge was at times openly hostile to enforcement staffers who brought fraud cases against commodity dealers.
According to Judge Painter, Judge Levine continued in the same roll, ruling against investors again and again, for the next decade.
Levine earned his law degree at the University of Chicago and was admitted to the bar in 1976, according to a brief entry in the Martindale directory of lawyers. Painter is a graduate of the University of Missouri law school and has practiced since at least 1957, the directory said.
Under the Dodd-Frank financial regulation law, the CFTC is charged with overseeing certain types of over-the-counter derivatives. The new authority will likely lead to an increase in investor claims to be adjudicated by the agency’s administrative law judges.
Questions about the CFTC’s administrative law judges don’t stop with Judge Levine. The Journal recently reported that Judge Painter’s wife, who is an attorney at the CFTC, has claimed that the retiring judge decided cases even as he struggled with mental illness and alcoholism. Judge Painter and his wife, Elizabeth Ritter, are in the midst of divorce proceedings.
Judge Painter asked that an administrative law judge from another regulatory agency oversee the remaining cases on his docket. He has six pending cases before him, with total claims of about $1 million, according to news reports.
Judge Painter’s allegations about the secret deal haven’t been verified.
Nor has Financial Reform Watch been able to confirm that the pattern of one-sided ruling continued unabated after the 2000 Wall Street Journal story. We’ve called the CFTC, and will update this story when we hear back.