The Supreme Court strips the SEC of a critical enforcement tool in fraud cases

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By MARK SHERMAN

WASHINGTON (AP) — The Supreme Court on Thursday stripped the Securities and Exchange Commission of a major tool in fighting securities fraud in a decision that also could have far-reaching effects on other regulatory agencies.

The justices ruled in a 6-3 vote that people accused of fraud by the SEC, which regulates securities markets, have the right to a jury trial in federal court. The in-house proceedings the SEC has used in some civil fraud complaints violate the Constitution, the court said.

The SEC was awarded more than $5 billion in civil penalties in the 2023 government spending year that ended Sept. 30, the agency said in a news release. It was unclear how much of that money came through in-house proceedings or lawsuits in federal court.

The agency had already reduced the number of cases it brings in administrative proceedings pending the Supreme Court’s resolution of the case.

The case is among several this term in which conservative and business interests are urging the nine-member court to constrict federal regulators. The court’s six conservatives already have reined them in, including in a decision last year that sharply limited environmental regulators’ ability to police water pollution in wetlands.

The high court rejected arguments advanced by President Joe Biden’s Democratic administration that relied on a 50-year-old decision in which the court ruled that in-house proceedings did not violate the Constitution’s right to a jury trial in civil lawsuits.

The justices ruled in the case of Houston hedge fund manager George R. Jarkesy. The SEC appealed to the Supreme Court after a divided panel of the New Orleans-based 5th U.S. Circuit Court of Appeals threw out stiff financial penalties against Jarkesy and his Patriot28 investment adviser.

The appeals court found that the SEC’s case against Jarkesy, resulting in a $300,000 civil fine and the repayment of $680,000 in allegedly ill-gotten gains, should have been heard in a federal court instead of before one of the SEC’s administrative law judges.

Jarkesy’s lawyers noted that the SEC wins almost all the cases it brings in front of the administrative law judges but only about 60% of cases tried in federal court.

The appeals court also said Congress unconstitutionally granted the SEC “unfettered authority” to decide whether the case should be tried in a court of law or handled within the executive branch agency. And it said laws shielding the commission’s administrative law judges from being fired by the president are unconstitutional.

Those issues got virtually no attention during arguments in November, and the court chose to resolve the case only on the right to a jury trial.

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The Supreme Court rejects a nationwide opioid settlement with OxyContin maker Purdue Pharma

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By MARK SHERMAN

WASHINGTON (AP) — The Supreme Court on Thursday rejected a nationwide settlement with OxyContin maker Purdue Pharma that would have shielded members of the Sackler family who own the company from civil lawsuits over the toll of opioids but also would have provided billions of dollars to combat the opioid epidemic.

After deliberating more than six months, the justices in a 5-4 vote blocked an agreement hammered out with state and local governments and victims. The Sacklers would have contributed up to $6 billion and given up ownership of the company but retained billions more. The agreement provided that the company would emerge from bankruptcy as a different entity, with its profits used for treatment and prevention.

Justice Neil Gorsuch, writing for the majority, said “nothing in present law authorizes the Sackler discharge.”

Justices Brett Kavanaugh, Ketanji Brown Jackson, Elena Kagan and Sonia Sotomayor dissented.

“Opioid victims and other future victims of mass torts will suffer greatly in the wake of today’s unfortunate and destabilizing decision,” Kavanaugh wrote.

The high court had put the settlement on hold last summer, in response to objections from the Biden administration.

It’s unclear what happens next.

“Today’s Supreme Court ruling marks a major setback for the families who lost loved ones to overdose and for those still struggling with addiction,” Edward Neiger, a lawyer representing more than 60,000 overdose victims, said in a statement.

“The Purdue plan was a victim-centered plan that would provide billions of dollars to the states to be used exclusively to abate the opioid crisis and $750 million for victims of the crisis, so that they could begin to rebuild their lives. As a result of the senseless three-year crusade by the government against the plan, thousands of people died of overdose, and today’s decision will lead to more needless overdose deaths.”

An opponent of the settlement praised the outcome.

Ed Bisch’s 18-year-old son Eddie, died from an overdose after taking OxyContin in Philadelphia in 2001.

The older Bisch, who lives in New Jersey, has been speaking out against Purdue and Sackler family members ever since and is part of a relatively small but vocal group of victims and family members who opposed the settlement.

“This is a step toward justice. It was outrageous what they were trying to get away with,” he said Thursday. “They have made a mockery of the justice system and then they tried to make a mockery of the bankruptcy system.”

He said he would have accepted the deal if he thought it would have made a dent in the opioid crisis.

He’s now calling on the Department of Justice to seek criminal charges against Sackler family members

Arguments in early December lasted nearly two hours in a packed courtroom as the justices seemed, by turns, unwilling to disrupt a carefully negotiated settlement and reluctant to reward the Sacklers.

The issue for the justices was whether the legal shield that bankruptcy provides can be extended to people such as the Sacklers, who have not declared bankruptcy themselves. Lower courts had issued conflicting decisions over that issue, which also has implications for other major product liability lawsuits settled through the bankruptcy system.

The U.S. Bankruptcy Trustee, an arm of the Justice Department, argued that the bankruptcy law does not permit protecting the Sackler family from being sued. During the Trump administration, the government supported the settlement.

The Biden administration had argued to the court that negotiations could resume, and perhaps lead to a better deal, if the court were to stop the current agreement.

Proponents of the plan said third-party releases are sometimes necessary to forge an agreement, and federal law imposes no prohibition against them.

OxyContin first hit the market in 1996, and Purdue Pharma’s aggressive marketing of it is often cited as a catalyst of the nationwide opioid epidemic, with doctors persuaded to prescribe painkillers with less regard for addiction dangers.

The drug and the Stamford, Connecticut-based company became synonymous with the crisis, even though the majority of pills being prescribed and used were generic drugs. Opioid-related overdose deaths have continued to climb, hitting 80,000 in recent years. Most of those are from fentanyl and other synthetic drugs.

The Purdue Pharma settlement would have ranked among the largest reached by drug companies, wholesalers and pharmacies to resolve epidemic-related lawsuits filed by state, local and Native American tribal governments and others. Those settlements have totaled more than $50 billion.

But the Purdue Pharma settlement would have been only the second so far to include direct payments to victims from a $750 million pool. Payouts would have ranged from about $3,500 to $48,000.

Sackler family members no longer are on the company’s board, and they have not received payouts from it since before Purdue Pharma entered bankruptcy. In the decade before that, though, they were paid more than $10 billion, about half of which family members said went to pay taxes.

The case is Harrington v. Purdue Pharma, 22-859.

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Associated Press writer Geoff Mulvihill contributed to this report from Cherry Hill, New Jersey.

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‘We Are People Too’: Scenes of Migration in Matamoros and Reynosa

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Back in her hometown in the state of Portuguesa, Venezuela, Magnaly Márquez had to make a choice: Buy her 3-year-old son a pair of shoes, or pizza. She didn’t have enough money for both—despite having studied business administration, working in a bank, and juggling side gigs for extra cash. Now, sitting in a charity hospital-turned-migrant shelter in Matamoros, Tamaulipas, Márquez’s eyes welled with tears as she recounted her story. 

In November, the 30-year-old single mother decided to leave for the United States with her son, Milands, in tow. They trekked across the Darién Gap, a treacherous stretch of jungle at the Panama-Colombia border. The Gap lacks roads and cell service. Criminal groups run amok. Migrants frequently run out of food and water, relying on untreated streams at the risk of illness or severe dehydration. 

When I met her in mid-June, Márquez had been waiting in northern Mexico, just across the river from Brownsville, since February. She hopes to seek asylum, which will ultimately require her to prove she faced a form of persecution beyond financial deprivation. Her home country is engulfed in a long-running crisis that is both political and economic.

“Above all else, one asks for humanity,” Márquez said, sitting on a metal bench in the sweltering summer heat. “We are people too. We are warriors who just want a better life—to work—for our children.”

Márquez is one of thousands of migrants in limbo south of the Rio Grande, awaiting their fate. During Joe Biden’s presidency, seeking asylum has been a fraught and ever-changing process. For much of Biden’s term, ports of entry were effectively closed to most asylum-seekers under an archaic public health measure, Title 42. The administration has opened special pathways for immigrants from certain countries including Venezuela, Haiti, and Cuba. At the same time, Biden has limited the means of requesting asylum by pushing migrants to request lottery-style appointments through an app called CBPOne and clamping down on the well-established right to request asylum even after crossing the border illegally.

In his most dramatic action yet, Biden issued an executive order earlier this month that suspends asylum access between ports of entry when daily crossings exceed a certain threshold. Traditionally, as codified in U.S. law, migrants may request asylum “whether or not at a designated port of arrival.” This order, already challenged by the American Civil Liberties Union, could upend that status quo.

(Francesca D’Annunzio)

In each country she passed through, Márquez said, she and her toddler-aged son stopped so she could work. They needed more money to continue their journey north. Along the way, she sold arepas and worked in a grocery store and at a printing press. But in Tamaulipas, the state that borders South Texas from Brownsville to Laredo, she said she can’t work. It’s dangerous to leave the shelter. 

She said she knows from personal experience: Márquez told me she and her son were grabbed on a bus earlier this year and kidnapped by cartel members in Reynosa for extortion. Such incidents are commonplace in northern Mexico border towns.

Late last year, armed men kidnapped 32 migrants from a commercial bus before abandoning them in a Reynosa parking lot. During former President Trump’s “Remain in Mexico” policy, asylum-seekers were repeatedly unable to attend their U.S. court hearings because they were being kidnapped. On June 14, the U.S. Consulate General in Matamoros sent out a travel advisory, cautioning against travel in nearby Reynosa, across from the McAllen area, due to kidnappings on intercity buses. That advisory was directed at U.S. citizens and residents, but asylum-seekers are specifically targeted for extortion. 

As of mid-June, there are around 2,000 asylum-seekers stuck in Reynosa waiting to cross into Texas and an additional 2,000 in Matamoros, according to an estimate from the Sidewalk School, a humanitarian nonprofit that works with asylum-seekers in both cities. I requested estimates from Customs and Border Protection and Mexico’s Instituto Nacional de Migración but have not received responses. 

In the Matamoros hospital-turned-refuge, known as the Pumarejo shelter, asylum-seekers wait in limbo for their CBPOne appointments—wait times average several months—spending the day helping run the facility or lying in their tents. Children have the option of attending English, Spanish, and art classes held by the Sidewalk School, but they do not attend local government schools. The adults are often unable to get jobs off-site to earn money; the cartel kidnappings have made it dangerous for migrants to leave the shelter.

Some asylum-seekers in Matamoros find refuge in an impromptu tent camp abutting the Rio Grande, with a clear view of the U.S. border, lined with concertina wire as far as the eye can see. In the encampment, asylum-seekers sleep in makeshift hammocks tied to mesquite trees or tents covered with black and blue tarps. As of mid-June, the area was mostly cleared out. After the Pumarejo shelter opened last August, asylum-seekers sought safety there instead, but around a couple dozen migrants remain in the camp.

The Kaleo International Shelter, a partnership between a Christian missionary organization and the Sidewalk School, is accessible by an unpaved dirt path, tucked away in a sparsely populated Reynosa neighborhood beside a park that’s home to mesquite, nopales, and wild pigs. The property is surrounded by concrete walls and enclosed behind a corrugated metal door. 

When I visited, 39-year-old Jorel Bien Aimé was sitting inside waiting to see a doctor. He was suffering from chronic neck and back pain, he said in Spanish. He’d traveled a long road to Reynosa from his hometown in Haiti, spending a few years in Chile, working various jobs to send remittances back to his family. He cleaned streets and plazas and picked blueberries and apples, but his wages often weren’t enough to actually send money home. Now, not having seen his family in six years, he felt depression setting in too.

“I feel very weak—physically, mentally, economically,” he said, covering his face as his hands began to tremble. He said he’s been waiting on his CBPOne appointment, where he will make his case for asylum, for seven months. The Kaleo Shelter mostly houses Haitian migrants.

(Francesca D’Annunzio)

Wadely Ostin, a former police officer in the Legislative Palace in Haiti’s capital Port-au-Prince, spent months in Reynosa but did not stay at Kaleo. He told me he never wanted to leave his home country. But, in October 2022, he said he started receiving threats to his family. His wife and son fled to the Dominican Republic, where Haitians face widespread discrimination and deportation. One evening as he was leaving work in Haiti, Ostin said members of a criminal gang tried to kill him, shooting at his car as he sped away.

Ostin said he waited close to a year for a CBPOne appointment. Each day, he checked his phone to see if he was selected. Last week, he finally had his appointment and was allowed to enter the United States, where he’ll pursue an asylum claim. After crossing, he sent me a picture of himself inside a car, grinning with his family, in Hidalgo, Texas.

In a phone call earlier this week, Ostin said he was enjoying the most peace he had felt in his life. As we chatted, I could hear his toddler son watching cartoons on a tablet. Now in a small, sleepy city on the Arkansas-Oklahoma border, he sees neighbors chatting and kids playing soccer outside well into the evening—simple pleasures that aren’t safe when it’s dark out in Port-au-Prince or Reynosa. 

Here, he said, “I’m not afraid of anything.”

Advocates Seek 11th-Hour Reversal of Adult Literacy Cuts, As Providers See Increased Demand

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Days before New York City’s final budget for the next fiscal year is due, both advocates and City Council members are urging that funding be maintained to reach a similar number of students served in the fiscal year that is about to end on July 1.

John McCarten/NYC Council

An adult education class Chinese-American Planning Council, Inc., in 2018.

For New Yorkers over the age of 16 who are not enrolled in school and who can’t speak, read, and/or write English well enough to participate in an English-language education or training program, adult literacy classes are a key option.

Students who participated in the Chinese-American Planning Council’s adult literacy programs shared in a survey that their lives changed after these classes. “Of course it improved my life,” reads one of the responses in Spanish, shared with City Limits from an internal survey of students who recently completed the organization’s programs.

“Now I can write a little bit of English, read, or go out on the street and read words, know what they say when someone speaks, and be able to understand a little bit. I felt like I was going out blind or deaf,” the respondent said. Now, it “is like not going out blind and deaf anymore,” they added.

For years, the city’ Department of Youth and Community Development (DYCD) has been working with community organizations to develop an adult literacy system that provides reading, writing, English, and math classes.  

Now, just days before New York City’s final budget for the next fiscal year is due, both advocates and City Council members are urging that funding be maintained to reach a similar number of students served in the fiscal year that is about to end on July 1.

The city budgeted $16.8 million for DYCD to bid on adult literacy programs through requests for proposals (RFPs) during the current fiscal year 2024. In the upcoming fiscal year, the Literacy Services RFP is baselined at $11.8 million, a $6 million reduction from previous years, or a cut of nearly 30 percent.

“Programs already only serve a very small fraction of students who need adult literacy skills,” Chinese-American Planning Council (CPC) Chief Policy and Public Affairs Officer Carlyn Cowen said.

”There are 2.2 million adults with limited English proficiency or who do not have a high school diploma. Last year, DYCD was only able to serve about 1 percent of these adults,” Cowen added. “With such a low percentage of need being served, with programs already critically underfunded, it is difficult to understand how DYCD and the city are able to make such draconian cuts to essential community programs.”

In addition to less funding overall, after years of advocating for a new price per participant (PPP) rate, the city agreed to change the per student per year rate from $900 to $1,300—which in turn would also reduce the number of students who can take part.

The New York City Coalition for Adult Literacy (NYCCAL) anticipates serving approximately 17,722 students this year. With the possible reduction in the budget, and considering the new PPP rate, they expect to reach just 9,118 students in the year ahead, a 48.5 percent reduction.

This cut would come at a time when providers of these programs have seen increased demand for classes, as more than 200,000 migrants and asylum seekers have arrived in the city in the last two years, tens of thousands of whom remain in the shelter system.

“This is coming at a time when the waitlist and demand for adult literacy programs has significantly increased citywide,” Cowen said, adding that there are hundreds of people on a waiting list for these classes, and many of them have recently arrived in the city.

To cover a population similar to what community-based organizations (CBOs) served this year, NYCCAL is asking for an additional $11 million: $6 million to cover what was previously allocated and $5 million to reach a similar number of students under the new per-student rate that will take effect in fiscal year 2025.

“Adult literacy is foundational programming for immigrants in our city. You can’t find a job, housing, education, health care, the list goes on, if you can’t fill out, read, or access the required documents,” said Councilmember Alexa Avilés, chair of the City Council’s Committee on Immigration. The Council is asking for an additional $10 million for DYCD programs. 

Credit: Gerardo Romo / NYC Council Media Unit

City Councilmember Alexa Avilés, who chairs the Immigration Committee, at a preliminary budget hearing for DYCD in March.

“$10 million is a drop in the bucket, and it has never been a question of if we have the money. We have it and then some. It’s entirely up to Mayor Adams and his administration to recognize that literacy is a lifeline for newly arrived New Yorkers, and must be a priority for this city,” Avilés said.

DYCD said that the city is working closely with the Council to support the priorities of both parties and will have more to say soon, adding that If additional funding is provided, they will increase the number of slots served.

“The Adams administration is committed to bringing equity to all New Yorkers, which is why DYCD developed a new RFP funding formula that incorporated poverty rates and expanded newly funded Adult Basic Education programs to communities such as East Harlem, Concourse Village, and Soundview,” DYCD Commissioner Keith Howard said in a statement. 

“DYCD continues to make sure communities previously without literacy programs are getting the services they need, and our administration is working with the Council to support our mutual priorities in the adopted budget.”

While the CBOs say the RFP reformulation looks good on paper—it used data from the 2020 American Community Survey to identify areas with higher rates of poverty, lower educational attainment, and limited English proficiency, which are called “Neighborhood Tabulation Areas”—in practice, the reality is more complicated.

According to NYCCAL, many Neighborhood Tabulation Areas (NTA) have no existing DYCD-funded literacy, and while organizations can apply for funding even when they’re outside these areas, they fear they will only be considered if there are no viable proposals from programs within the zone. 

“While the RFP was amended after a huge outcry to allow CBOs outside of the NTA to apply, it was also set up to prioritize organizations within the NTA, de facto creating barriers for organizations that have been doing this work in communities for decades,” Cowen said.

DYCD has been notifying CBOs since Friday on whether they won funding under the new RFP, but did not specify how many programs are expected to operate in fiscal year 2025 and how it compares to previous years, saying the number of programs will be available after all RFP awards are finalized. 

“The recent RFP has been difficult on providers,” J.T. Falcone, United Neighborhood Houses’ communications director, wrote via email. “Some awards have been made at this point, but a lack of clear communication from DYCD has created a destabilizing environment where contracts are set to end at the end of the month, but we don’t know where the new ones will be going forward.”

Program providers who spoke to City Limits fear that between budget cuts and the new formula for awarding contracts, the city’s adult literacy program system will undergo a multi-level restructuring that will ultimately affect those who need these classes. 

“We anticipate some providers who aren’t awarded new contracts will have to do layoffs, but we still don’t have clear guidance from the City on how to handle those, which has been difficult,” Falcone added.

To reach the reporter behind this story, contact Daniel@citylimits.org. To reach the editor, contact Jeanmarie@citylimits.org

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