Doe v. Sec. & Exch. Comm'n
| Decision Date | 15 November 2022 |
| Docket Number | 21-2537 |
| Parties | JOHN DOE, Petitioner, v. SECURITIES AND EXCHANGE COMMISSION, Respondent. |
| Court | U.S. Court of Appeals — Second Circuit |
UNPUBLISHED OPINION
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT'S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION "SUMMARY ORDER"). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 15th day of November, two thousand twenty-two.
On Petition for Review of an Order of the Securities and Exchange Commission.
For Petitioner: EZRA SPILKE, Law Offices of Ezra Spilke Brooklyn, NY.
For Respondent: EZEKIEL L. HILL, Attorney (Dan M. Berkovitz General Counsel, Michael A. Conley, Solicitor, Stephen G Yoder and Emily T. Parise, Senior Litigation Counsel, on the brief), Securities and Exchange Commission, Washington, DC.
PRESENT: Jon O. Newman, Guido Calabresi, Steven J. Menashi, Circuit Judges.
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the petition is DENIED. John Doe petitions for review of an order of the Securities and Exchange Commission ("SEC") denying him a whistleblower award. We assume the parties' familiarity with the underlying facts and procedural history.
In general, federal law directs the SEC to pay a monetary award to a whistleblower when that whistleblower "voluntarily provided original information to the Commission that led to the successful enforcement" of "any judicial or administrative action brought by the Commission under the securities laws that results in monetary sanctions exceeding $1,000,000." 15 U.S.C. § 78u-6(a)(1), (b)(1). But the SEC may not make an award "to any whistleblower who is convicted of a criminal violation related to the judicial or administrative action for which the whistleblower otherwise could receive an award." 15 U.S.C. § 78u-6(c)(2)(B).
John Doe is a whistleblower. He provided information to the SEC that assisted in a successful agency enforcement action with respect to an international bribery scheme (the "Covered Action"). After the SEC posted a notice on its website about the Covered Action, Doe timely filed an application for a whistleblower award pursuant to 15 U.S.C. § 78u-6(b)(1) in connection with both the Covered Action and a related action (the "Related Action"). By that point, however, Doe himself had pleaded guilty to bribery charges. A court had accepted Doe's guilty plea but had not yet sentenced him. Because of the accepted guilty plea, the SEC determined that Doe had been "convicted of a criminal violation related to" the bribery scheme that was at issue in the Covered Action and the Related Action. 15 U.S.C. § 78u-6(c)(2)(B). The SEC issued a preliminary determination recommending the denial of Doe's award application. Doe contested the preliminary determination, and a few months later the SEC issued its final order denying a whistleblower award to Doe.
The "determination . . . whether . . . to make [a whistleblower] award[]" is at "the discretion of the Commission." 15 U.S.C. § 78u-6(f). We review the determination of the SEC as to whether to make a whistleblower award for abuse of discretion and-to the extent the agency makes findings of fact-for substantial evidence. See id. (); see also Kilgour v. SEC, 942 F.3d 113, 120 (2d Cir. 2019) () (internal quotation marks and alteration omitted).
Doe challenges the SEC's interpretation of two key terms in 15 U.S.C. § 78u-6(2)(B): "convicted" and "related to." He argues that he was not "convicted" and that his criminal conduct was not "related to" the bribery scheme at issue in the Covered and Related Actions. He additionally argues that the SEC did not adequately explain its reasoning in denying the whistleblower award. We disagree. Doe forfeited his challenge to the SEC's interpretation of "convicted," which in any event lacks merit, and the SEC properly interpreted and applied the "related to" provision of the statute. The agency adequately explained its reasoning and supported its findings with substantial evidence. We deny Doe's petition for review.
Doe argues that he was not "convicted" under 15 U.S.C. § 78u-6(c)(2)(B). In Doe's telling, the fact that he has not yet been sentenced-even though a court has accepted his guilty plea-means that he has not been "convicted." But Doe did not raise this issue before the agency and therefore we need not address Doe's argument about the meaning of "convicted." But even if we were to excuse the forfeiture, Doe's argument would fail.
SEC regulations provide that when a claimant contests the agency's preliminary determination about a whistleblower award, the claimant must "set[] forth the grounds for [his] objection to either the denial of an award or the proposed amount of an award." 17 C.F.R. § 240.21F-10(e). When Doe contested the SEC's preliminary determination in this case, he did not argue that he was not "convicted" under the applicable statute. Doe's failure to comply with the administrative process for raising the argument before the agency prevents him from raising it for the first time on appeal. Xiao Ji Chen v. USDOJ, 471 F.3d 315, 320 n.1 (2d Cir. 2006).
Doe resists this conclusion. He notes that in a footnote in its final order, the SEC described its interpretation of the term "convicted" despite Doe's failure to challenge that interpretation when he contested the preliminary determination. Doe points to Ye v. Department of Homeland Security, in which we excused an alien's failure to raise a claim before the Board of Immigration Appeals ("BIA") because the BIA addressed the merits of the claim. 446 F.3d 289, 296-97 (2d Cir. 2006). Yet here, unlike in Ye, the agency did not address an argument the petitioner failed to raise. Instead, the SEC simply noted its longstanding interpretation of the term "convicted" as it addressed Doe's argument that his conviction was not "related to" the Covered and Related Actions. J. App'x 393 n.15 (quoting In the Matter of Gregory Bartko, Release No. 71666, 2014 WL 896758, at *8 (Mar. 7, 2014), aff'd in part, rev'd in part on other grounds, Bartko v. SEC, 845 F.3d 1217 (D.C. Cir. 2017)). Doe was on notice from the preliminary determination that the agency believed his accepted guilty plea disqualified him from the whistleblower award. Having failed to contest before the agency its determination that one is "convicted" when he has pleaded guilty, Doe is not entitled to raise the issue for the first time on a petition for review. Xiao Ji Chen, 471 at 320 n.1.
Even if Doe had not forfeited his argument about the term "convicted," the argument would fail. The agency did not err in adhering to its view that "there is no reason for ascribing a different meaning to the word 'convicted' in the Exchange Act to the meaning given to that term in the Advisers Act." Gregory Bartko, 2014 WL 896758, at *8 (alteration omitted). Doe contends that a person may be considered "convicted" only after a sentence is imposed, but that is not correct. See, e.g., United States v. Adkins, 743 F.3d 176, 188 (7th Cir. 2014) (); United States v. White, 620 F.3d 401, 414 (4th Cir. 2010) (); United States v. Montoya, No. CR-89-409, 1990 WL 252179, at *1 (E.D.N.Y. Dec. 17, 1990) ().
Doe also argues that the bribery charges to which he pleaded guilty were not "related to" the Covered and Related Actions. He additionally argues that the agency did not support its finding of such a relationship with substantial evidence.
We disagree.
A whistleblower is ineligible under 15 U.S.C. § 78u-6(c)(2)(B) for an award from the SEC if he was "convicted of a criminal violation related to the judicial or administrative action for which the whistleblower otherwise could receive an award." Id. (emphasis added). The SEC and Doe understand the term "related to" differently. The SEC interprets the term to mean that "the conduct underlying the criminal conviction must be connected to or stand in some relation to the Covered Action." J. App'x 394. Doe suggests that the term requires the whistleblower to...
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