Civil Rights Group Indicted, FCC Fines Under Fire & Military Draft

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2:07The Southern Poverty Law Center has positioned itself as the country's preeminent hate group watchdog, putting out an influential list of hate groups. The civil rights nonprofit has for years faced scrutiny from Republicans who claim it's unfairly targeted right-wing organizations. And this week, the Justice Department indicted the SPLC on federal fraud charges, alleging it improperly raised millions of dollars to secretly pay leaders of hate groups for inside information, according to acting attorney general todd blanche the money was passed from splc to one sham account to a second sham account and then loaded onto prepaid cards to give to the members of the extremist groups the splc said it's outraged by the false allegations its ceo brian fair said today the federal government has been weaponized to dismantle the rights of our nation's most vulnerable people and any organization like ours that tries to stand in the breach.

3:14My guest is an expert in white-collar crime, Professor John Coffey of Columbia Law School. Jack, until recently, the SPLC was working with the FBI to provide the intel that was gathered by its informants. That's until FBI Director Kash Patel severed the relationship last year. Is there anything illegal about hiring informants the way that they did?

4:06That's not what they're alleging. They're alleging fraud on the donors. That's what they keep saying again and again. And fraud on the donors, I think you could put half the donors on the stand, and they would testify that they were very happy the money was used to get sources within violent organizations to tell the SPLC what they were doing. I don't think there is any reason my nonprofit organization can't undertake surveillance trying to reveal to the public the behavior of violent and extreme organizations. And by the way, the FBI does the same thing. They pay even larger amounts to informants over the years to infiltrate organizations on both the left and the right.

4:45So then you don't think this charge that the SPLC was funding extremist groups will hold up? Well, you're allowed to fund extremist groups. If you want to give money to any party, including the Communist Party, you're allowed to do that. They gave them money to their field agents. The field agents may have passed some of that on to the Ku Klux Klan, but they were basically paying people to serve as undercover agents, which is dangerous. There can be reprisals and retribution, and people don't do anything dangerous for that being well compensated. Moreover, although they took about a million dollars, these were payments made annually over nine years.

5:23And if you divide a million dollars by nine, it's a more reasonable number to have paid an agent to do something that was dangerous. The indictment also charges bank fraud, alleging that the SPLC created bank accounts for fictitious entities and used those to send money from donors to informants. Lots of people do this. I think you can find cases where that might be criminal if it was part of a scheme to defraud. But no one is defrauding the bank. And the bank said, you have to change this. It doesn't look appropriate. And they did change it. They cooperate. I don't think there's any real bank fraud here.

6:00That is, I don't think this was material information to the bank. It was organizations that were really non-existent, but I don't know that there was any fraud committed on the bank. And what about the money laundering charge? Now, money laundering can only be a crime if you engaged in a crime and take the proceeds of that crime and move it through the financial system. If there is no crime, there is no money laundering. So do you think the Southern Poverty Law Center could get this indictment dismissed before trial? I don't think it'll be upheld. It depends on the judge handling the case. Some judges will let the case go forward to see if evidence is accumulated and looks promising a trial.

6:40But I do think there is a good chance that this could be dismissed at the outset. I've read lots of indictments. Department of Justice usually writes strong, specific, well-reasoned indictments. This is vague and it wanders all around. I think it's a very thin and poorly written indictment. It won't surprise anyone to say this appears to be part of a pattern in which the Trump administration has gone against its political enemies. You can talk about cases that have been dismissed, including against the attorney general of New York State and other persons. And they are still trying to pursue a case against the chairman of the Federal Reserve.

7:15Anytime there's a political enemy, there tends to be a criminal investigation of them. I mean, the SPLC has been the target of Republicans for years, and House Republicans held a hearing centered on the SPLC in December. It's quite possible the Southern Poverty Law Center does controversial things. That's not criminal. You're going to have to show that they defrauded some victim. They've been doing this for 30 years, so it's nothing new. It's been clear they've been getting inside information about these organizations. They didn't tell the various organizations they were looking into that they were conducting surveillance of them.

7:52But no one does. The FBI does this at a much greater volume, and they don't tell people we're conducting surveillance. And you brought up Fed Chair Powell. What do you think about the investigation into him? Well, I think that's another example of what looks like a political retaliation. You aren't doing what I want you to do. Chairman Powell isn't even criticizing the president. He's not engaged in political criticism. He's simply doing what he thinks is his obligation, which is to retain interest rates at a level that protects the economy from rapid inflation and disaster. And he's facing reprisal, criminal reprisal, for rather strange and not yet carefully spelled out activities in connection with the renovation of the Federal Reserve Bank.

8:35Thanks so much for taking the time, Jack. That's Professor John Coffey of Columbia Law School. This message is brought to you by Apple Card. Apple Card members can earn unlimited daily cash back on everyday purchases wherever they shop. This means you could be earning daily cash on just about anything, like a slice of pizza from your local pizza place or a latte from the corner coffee shop. Apply for Apple Card in the Wallet app to see your credit limit offer in minutes. Subject to credit approval, Apple Card issued by Goldman Sachs Bank USA, Salt Lake City Branch. Terms and more at AppleCard.com.

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9:56In Season 3 of The Visibility Gap, Dr. Guy Winch and his guests explore how these pressures show up, how to spot them earlier, and how men can access meaningful support. Listen to the new season of The Visibility Gap, a podcast presented by Cigna Healthcare. AT &T and Verizon are trying to recoup the$104 million they paid in penalties after the FCC said they had illegally sold customers' location data. The companies are challenging the FCC's process as unconstitutional at the Supreme Court, saying the fines were assessed without giving them the right to a jury trial. Most of the justices appeared skeptical.

10:40Chief Justice John Roberts told AT &T's lawyer it seemed like a PR problem. Counsel, I wonder if, though, at the end of the day, you're really just talking about a PR problem, right? You're just saying they're big letters, the language said we did something bad, and that's so everybody has to pay so they don't get, you know, a bad PR. And I'm just wondering, in terms of the substantive legal issue, though, you are not obligated to pay. until you get a jury. And Justice Amy Coney Barrett said, just don't pay the fines. Mr. Wall, if they are final and if they have, like in your view, this effect, why do you have to pay them?

11:21But surprise, surprise, the FCC made a concession that amounts to a win for the companies. The Justice Department's lawyer, Vivek Suri, said companies don't have to pay FCC penalties right away. And the FCC can't try to collect a fine, add interest, or punish a company for not immediately paying. The agency cannot start collecting the money as the SEC could in the Jarkisi scheme. It has to go to court in order to collect the money. Second, there's no penalty or punishment for failing to pay that order. And third, that interest doesn't start trueing until the penalty becomes. Justice Brett Kavanaugh called that a win for the companies and suggested they might be able to get their money back.

12:10Joining me is an expert in telecommunications and internet law, Daniel Lyons, a professor at Boston College Law School. Daniel, explain the issue the court was considering about the right to a jury trial. Historically, when a regulated entity at the FCC violates FCC rules, the FCC has reserved the right to adjudicate these cases in-house. So in this case, AT &T and Verizon were alleged to have, I guess the right way to say it is, not taken enough care of customer data that were shared with third parties. And so they were held in violation of a particular part of the Telecommunications Act and were assessed between the two of them a fine of$100 million.

12:53So the question that has been at the center of this case from the beginning is, were they entitled to a jury trial on those facts? At the time that the FCC proceeding began, most of the admin law universe thought it was okay for agencies to handle these cases in-house rather than having to go to court. But a couple of years ago, the Supreme Court issued a case called SEC v. Jarkese, which said that in certain cases, agency adjudication of liability outside of the court system violated the Seventh Amendment, which says that in cases at law where a matter in controversy is more than$20, that the defendant has a right to a trial before jury.

13:32And of course, there's no juries at agencies. So in the case of this AT &T and Verizon fines, AT &T and Verizon both challenged the proceeding after Jarkazy, alleging that like the SEC proceeding to Jarkazy, these proceedings were analogous to suit at court of law and therefore should not have been handled in-house. Instead, they should have been tried by the agency before a jury in court. So going outside the legal questions for a minute, I find it hard to believe that those two carriers would fare well before a jury over claims of failure to protect customer data. I mean, is this just a strategy to recoup the fines or do they really mean it?

14:18It's a good question. I think the short answer is yes, because when you go before the court system, you get a number of procedural protections that you wouldn't get before the agency. So the federal rules of evidence apply, right, or the state analog if you're in a state law case. There are somewhat analogous protections in some agency adjudications, but not all of them, and they're never as robust as what you get in a federal court. More importantly, you get a decision maker that's not an employee of the agency, right? Even in the most formal of agency adjudications, they're being decided by an administrative law judge.

14:50The agency takes some efforts internally to make sure that the adjudication side of the house is different from the enforcement side of the house. But that's, I think many critics would say, a pale imitation of the constitutional separation of powers that we require outside of the admin law context. So there was a lot of discussion in the Supreme Court arguments about whether the FCC's fines are binding or non-binding, particularly Justice Kavanaugh and Justice Gorsuch pressed on that. Explain why that's important. Yeah, so it's a little bit nuanced because the agency's position has changed over the course of the proceeding.

15:30Justice Kavanaugh had a great quip that Verizon's reply brief started by saying the government is in retreat. Kavanaugh agreed with that and so do I. When the case began, the agency's view was there's no Seventh Amendment problem with this, but that was before Jarkhazy. After Jarkhazy, the agency's view was the Seventh Amendment is satisfied because even though we're deciding liability and issuing a fine in-house, the entities are not required to pay immediately. So after an FCC proceeding, AT &T has two choices, right? So assume they are found, you violated the law and you owe a$47 million fine.

16:06AT &T gets two choices. It can pay the fine and appeal the liability decision before the DC circuit. Or it can do nothing, basically say, come at me and wait to see if the Department of Justice sues on behalf of the agency to collect the fine. In the latter case, the trial is de novo before a court. But in the former case, right, going straight to if the agency pays the fine and goes straight to the court of appeal, the court of appeal doesn't have a jury. And so it's essentially waiving the jury trial right in order to be able to clear its name. So AT &T was of the view that this is sort of a hopeless choice, right?

16:42I can either challenge the fact that I violated the law, in which case I have to waive my jury right, or I can sit around with the sort of Damocles hanging over my head forever and see if the DOJ ever comes after me. So at the Fifth Circuit and then leading up to the Supreme Court's taking a certiorari, the agency's position was the fact that you have the option of waiting and seeing if we'll sue you is enough to guarantee your jury trial right because you'll get a trial de novo eventually, even though you already have been basically tried before the agency ex ante. There are two, I think, potential problems with this.

17:21One is you're not guaranteed a jury trial right, right? You're guaranteed a jury trial right if and only if the DOJ chooses to pursue the fine. Now, you may say, well, that's fine. If the DOJ doesn't pursue the fine, you don't have to give up the money. But the liability ruling would still stand. And a finding that a carrier has violated the law can have collateral consequences. A, PR issues, right? Big headlines, AT &T mishandles customer information. But B, it can affect future FCC proceedings. So wireless carriers operate pursuant to a license to use the spectrum in order to be able to send the radio waves to and from your cell phone.

17:59Those licenses are issued by the government for a fixed period. And when the FCC decides to renew those licenses, it takes into consideration, were you a good citizen? And willful violations of the law can count against you. It can be a grounds for the FCC to say, we will not renew your license going forward. So I think the agency eventually realized the difficulties of this argument as well, because by the time they were before the Supreme Court in an argument yesterday, the agency's position was that what happens at the agency is completely not binding. It's essentially the equivalent of a charging document.

18:32The FCC has investigated this and is now authorizing the DOJ to go after the entity on these grounds and for this amount of money. Only if the DOJ then chooses to pursue it in court is AT &T ever liable and ever potentially have to pay the fine. So there's a sense in which no matter what happens in the opinion, AT &T and Verizon have won a huge victory already. And I think many of the justices recognize that going forward, the adjudication process is going to be very different than it was in the past. The basic question left over is kind of what possibly can be the preclusive effect of those not binding orders in collateral proceedings.

19:09As to the question about whether AT &T and Verizon's Seventh Amendment rights were violated, did you think a majority of the justices felt they weren't violated? I will say the answer is a little bit more nuanced. I think the agency has conceded that under the way the agency did business up until this case, it would have been a Seventh Amendment violation, which, like I said, I think is already a huge win for AT &T. I think the question going forward is, does the agency's disclaimer of any bindingness by the FCC order solve that problem? It seems like much of the court said yes. If we accept the government's concession that none of these orders are binding unless and until the DOJ seeks to enforce them in court, then it's probably not a Seventh Amendment issue.

19:56I think you're probably going to get a majority on that. But I think the advocates were still disputing kind of what not binding means. The FCC wanted to hold on to the fact that if we find facts in the earlier proceeding, we might be able to rely upon those in a later proceeding because the later proceeding would also be subject to judicial review before a jury. And I think AT &T was uncomfortable making even that concession. But this feels like a minor issue in the grand scheme of the case. Question about whether AT &T will be able to get back what they paid. Wade Kavanaugh suggested they were duped by the FCC and they should get their money back?

20:35Yeah. So up until the grant of certiorari in this case, the FCC was under the view that we ordered you to pay this fine. And even though we have to wait for the DOJ to enforce it, if you want to seek your right for immediate appeal, you have to pay. This is under DC circuit precedent. If now the agency is changing its position and saying, actually, although the order said this is a fine, it, you have to pay it. We didn't really mean it. Justice Kavanaugh's concern was, well, AT &T then paid because they thought they had to, and now you're saying they don't. I think the FCC had a good response to that, which is, well, we told them they always had the option to wait and not pay and then see if the DOJ enforces.

21:12But also, if you think they've been duped, that's probably a good question to answer on remand, right? So raise the question, then remand it back to the district court for further fact-finding on that question. I think that's probably fair. I mean, what are the chances that they'll get the money back? I actually think it sounds pretty good at this point. Really? I guess the key question is, is the DOJ then going to go ahead and file a separate lawsuit, in which case we will get exactly where you started in your questioning, which would be a trial before a jury of AT &T and Verizon customers about whether their information was mishandled.

21:42It may or may not go the way the carriers want them to. I think that's sort of the next chapter in this case. Right now, they're trying to get out of a nearly certain fine by the agency. And it seems like regardless of what the court does, they've gotten a concession that the fine is currently not binding on them. So I think they're going to try to get their money back. Good luck with that. So I read that this decision could have implications for other federal agencies that assess similar civil penalties before holding a jury trial, even though the FCC has made those concessions here. Does the decision still have those implications for other agencies?

22:16It does, because the key issue, I think, the problem for the FCC is the statute doesn't say anything about it being not binding. In fact, the statute says quite the opposite. It says that you have been assessed and uses much more mandatory language. It's language that lots of agency enforcement statutes use. And if the Supreme Court says in order to avoid a constitutional Seventh Amendment problem, we're going to interpret this statute to only be not binding, as the FCC suggests, that's going to have a ripple effect to many other agencies as well. What it does is it turns what is right now in a largely in-house alternative, a cheaper alternative to going to court in order to settle disputes, to be much more like a prosecutor deciding whether or not to charge a case.

23:00The effect of this is going to be to move the question of whether a party is actually liable away from agencies and more toward courts. So right now, agencies adjudicate a lot of cases in-house as an alternative to going to court because it's cheaper, it's faster. If this statute and several others like it are interpreted as making those agency decisions only not binding, unless and until the DOJ sues to enforce them in court, it's going to make that cheap, quick resolution of enforcement fines much less likely to happen. So agencies will stop sort of adjudicating many of these cases, or at least fewer, I would say, some of them will still handle in-house, but more of them will be moved into the court system.

23:41Do you see this case as a challenge to the power of administrative agencies? This is consistent with the broader trend in administrative law that we've been seeing for a long time with this Supreme Court. Agencies have always been uncomfortable entities for folks who believe in an originalist conception of government because the separation of powers between the executive, the legislative, and the judiciary are all mashed together in an agency. It feels like the long-term project of this court has been to try to unwind those and make agencies much more into what they appear to be on the government org chart, right, a branch of the executive, as opposed to entities that mix the powers and violation of separation of powers.

24:26Giacchese was a big move in that direction, and I think this decision will probably advance that ball a little bit more. That was a great explanation of the conservative justice's attitude toward the so-called administrative state. Thanks so much for joining me, Daniel. That's Professor Daniel Lyons of Boston College Law School. Everyone has been there. Your team's feedback is scattered across emails, chats, and sticky notes. It's a mess. But PDF Spaces and Adobe Acrobat gives you one collaborative workspace to streamline every file and comment. So, if you need six departments to finally agree on a proposal, do that with Acrobat.

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