WASHINGTON - A standing order is preventing Securities and Exchange Commission lawyers from litigating during the federal government shutdown, pausing progress on most SEC enforcement actions.
While the SEC does have a select few personnel available for emergency action, work on existing lawsuits is essentially halted in the absence of government funding. The shutdown is now in its third week after a showdown over border wall funding prevented lawmakers and President Donald Trump from agreeing on a funding package in time to fund government operations.
SEC attorney Lee Greenwood on Friday filed a letter with a federal court in New Jersey informing the judge that the SEC believes the case is at a halt due to an outstanding order filed in the district late last year.
Greenwood referenced a court order titled “Stay of Civil Matters Involving the United States as a Party,” otherwise known as Standing Order 18-4. That order, entered by Chief New Jersey District Judge Jose Linares, said that a stay is appropriate in the interests of justice. It effectively pauses most civil litigation involving the United States.
“Absent an appropriation, the United States represents that certain Department of Justice attorneys and employees of the federal government are prohibited from working, even on a voluntary basis, except in very limited circumstances,” the judge wrote, “including ‘emergencies involving the safety of human life or the protection of property.’”
“Therefore the lapse in appropriations requires a reduction in the workforce of the United States Attorney’s Office and other federal agencies, particularly with respect to prosecution and defense of civil cases,” the order went on. “The court, in response, and with the intent to avoid any default or prejudice to the United States or other civil litigants occasioned by the lapse in funding, enters this order.”
Greenwood and other SEC attorneys had been close to finishing their case against Todd Barker and Dwayne Edwards, two men charged with participation in a fraudulent senior housing bond scheme. The SEC and Edwards were in the midst of contesting how much of a financial penalty Edwards should pay, and the court had scheduled a hearing for Jan. 22.
Barker agreed to a settlement with the SEC and is awaiting court approval of that settlement.
The SEC had previously released an operations plan explaining which of its functions would be affected by a lapse in government funding. All but certain non-deferrable litigation is discontinued under the work plan, though the plan specified that “a limited number of staff will be on duty to handle emergency enforcement matters, including temporary restraining orders and/or investigative steps necessary to protect public and private property.”
While negotiations are in progress between Trump and House Democrats aimed at ending the shutdown, neither side has signaled when a compromise will be reached.
