A GROUNDED THEORY ANALYSIS OF CIVIL AND ADMINISTRATIVE CASES PURSUED BY THE SECURITY AND EXCHANGE COMMISSION ___________ A Thesis Presented to The Faculty of the Department of Criminal Justice and Criminology Sam Houston State University ___________ In Partial Fulfillment of the Requirements for the Degree of Master of Arts ___________ by Matthew Caines August, 2021 A GROUNDED THEORY ANALYSIS OF CIVIL AND ADMINISTRATIVE CASES PURSUED BY THE SECURITY AND EXCHANGE COMMISSION by Matthew Caines ___________ APPROVED: Jurg Gerber, PhD Committee Director Elisa Toman, PhD Committee Member Mitchel Roth, PhD Committee Member Phillip Lyons, PhD Dean, College of Criminal Justice ABSTRACT Caines, Matthew, A grounded theory analysis of civil and administrative cases pursued by the Security and Exchange Commission. Master of Arts (Criminal Justice and Criminology) August, 2021, Sam Houston State University, Huntsville, Texas. In the midst of the Great Depression in the 1930s, the government took considerable actions in an attempt to control the questionable and troubling practices of business to help prevent a similar crisis from ever burdening the nation again. What it created was the Securities and Exchange Commission (“SEC”), which today continues to bear primary responsibility for the administration of securities laws and enforcement actions against violators. Moreover, the SEC has increasingly gained enforcement capacities over its lifespan. Today, it can not only impose professional bars on violators, but also force them to forfeit any ill-gotten gains and even pay monetary fines through civil and administrative proceedings. While not conventionally thought of as criminal, these white-collar offenses can have a tremendous and harmful impact on their victims and the larger market. This research used a grounded theory approach to explore themes across the way the SEC handles the violators it detects and pursues in these proceedings, while also examining a small number of cases that were dealt with in the criminal courts. Publicly available litigation releases available through the agency’s website were used. Overall, the SEC was observed to operate in a generally predictable and equitable manner in which most of those who are charged are ultimately sanctioned in some way. Particularly interesting interactions were observed between entities and sanctioning outcomes. A secondary objective was to compare the handling of cases by the SEC under the administrations of two presidents from different parties, George W. Bush, a Republican, and Barrack Obama, a Democrat. The two periods exhibited a good deal of iii similarity, but also unexpectedly showed that more severe monetary penalties were imposed during the Bush administration. The thesis concludes with a discussion of limitations and policy implications. KEY WORDS: White-collar crime, SEC, Litigation releases, Administrative proceedings iv ACKNOWLEDGEMENTS I would like to thank my entire committee members for providing useful feedback. I am especially grateful for Dr. Gerber’s time, insight, humor, and patience throughout the project. I am thankful for my family’s continued support throughout the process, especially that of my father. I also wish to acknowledge the help and guidance provided by Ms. Dianna Kim in the tedious task of formatting the citations of the referenced SEC cases. v TABLE OF CONTENTS Page ABSTRACT ....................................................................................................................... iii ACKNOWLEDGEMENTS .................................................................................................v TABLE OF CONTENTS ................................................................................................... vi LIST OF TABLES ........................................................................................................... viii CHAPTER I: INTRODUCTION ................................................................................... 1 CHAPTER II: LITERATURE REVIEW AND BACKGROUND .................................. 8 White-Collar Crime ..................................................................................................... 8 The Securities and Exchange Commission ................................................................ 14 Civil Actions .............................................................................................................. 17 Administrative Proceedings ....................................................................................... 20 Agency Effectiveness ................................................................................................ 21 Criticism .................................................................................................................... 25 New Regulation for the 2000s ................................................................................... 32 Presidential Administration Impact ........................................................................... 33 Shapiro’s Observation of SEC Actions ..................................................................... 35 CHAPTER III: METHODS ............................................................................................ 38 CHAPTER IV: FINDINGS ............................................................................................. 45 Descriptive Statistics/Quantitative Results ................................................................ 47 Administrative Cases ................................................................................................. 50 Civil Cases ................................................................................................................. 71 Criminal Cases ........................................................................................................... 90 vi Themes Across Cases ................................................................................................ 95 Presidential Administration ..................................................................................... 115 CHAPTER V: DISCUSSION ...................................................................................... 120 Limitations ............................................................................................................... 126 Conclusion ............................................................................................................... 127 REFERENCES ............................................................................................................... 129 VITA ............................................................................................................................... 144 vii LIST OF TABLES Table Page 1 Breakdown of Case Types .................................................................................... 46 2 Descriptive Statistics for Administrative Cases .................................................... 48 3 Descriptive Statistics for Civil Cases .................................................................... 48 4 Cost of Offense to Victims ................................................................................... 49 5 Dollar Amount of Fines Imposed ......................................................................... 49 6 Number of Victims ............................................................................................... 50 7 Number of Offenders ............................................................................................ 50 8 Breakdown by type of Administrative Action ...................................................... 51 9 Percentage of Administrative Sanctioning Cases in which Each Penalty was Imposed ................................................................................................................. 53 10 Breakdown by Type of Civil Action ..................................................................... 73 11 Percentage of Civil Sanctioning Cases in which Each Penalty was Imposed ...... 75 12 Administrative Monetary Penalties in Cases from Bush’s Presidency ............... 116 13 Administrative Monetary Penalties in Cases from Obama’s Presidency ........... 117 14 Civil Monetary Penalties in Cases from Bush’s Presidency ............................... 118 15 Civil Monetary Penalties in Cases from Obama’s Presidency ........................... 118 viii 1 CHAPTER I Introduction Though it has maintained a somewhat overlooked position in criminal justice research, white-collar crime has a considerable impact on not only individuals, but the larger economy. Beyond mere monetary costs, victims of these offenses often suffer in ways similar both emotionally and physically to those who are harmed by more conventional forms of criminality (Golladay & Holtfreter, 2017; Payne, 2012; Perri, 2011). At the same time however, many victims of white-collar offenses are not even aware of their victimization (Friedrichs, 2007). These offenses can often be easily concealed or construed as routine, legal, business activity. Moreover, those who do may be unsure of what actions they should take and what authorities they should alert. Tasked with preventing economic crimes in the United States and holding their perpetrators accountable is the Securities and Exchange Commission (“SEC”), a relatively small but nonetheless potent, federal agency that was created following the 1929 stock market crash (U.S. Securities and Exchange Commission [SEC] 2013). Its creation, though widely resisted by many in the