IJ and Cato Team Up to Challenge Government Gag Orders

By Robert McNamara

The Cato Institute, like any think tank, publishes a lot of books. And publishing books comes with challenges: Sometimes authors are late with revisions, and sometimes people disagree about the cover design. But this year, Cato came across a publishing problem it had never seen before: The book it wanted to publish was illegal.

A man who had written a harrowing tale of his prosecution at the hands of the Securities and Exchange Commission (SEC) approached Cato last year about publishing his book. About a decade ago, the SEC had accused him of truly staggering malfeasance, blasting out a press release that made him look like a cross between Bernie Madoff and Mephistopheles. As he tells it, after a lengthy and expensive battle, he ultimately agreed to admit to a couple of minor legal violations (nothing like the initial charges) in order to escape the increasingly crushing financial burden of defending himself.

Angry at his treatment by the government, he wrote a book to try to draw attention to what he views as extreme prosecutorial overreach—and Cato, concerned as it is with criminal justice reform, wants to publish that book. It just can’t.

The problem? In the original case, the SEC refused to agree to a settlement unless it contained a lifetime gag order preventing the defendant from ever publicly questioning any of the allegations against him. The SEC does this as a standard practice in every civil enforcement action it brings: If the SEC accuses you of doing five things and you ultimately agree to admit to only one of them, the SEC will not settle the enforcement against you unless you promise to never publicly challenge its allegation that you did the other four. The SEC’s assertions in its press release have to be the last word on the topic.

The SEC seems to have invented this practice back in the Nixon administration, and other law enforcement agencies have since followed suit. It’s easy to see why: Gag orders like this let law enforcement turn its already enormous powers to punish people into the ability to silence criticism of how it uses those powers. But the Constitution does not allow this kind of horse-trading: Government officials cannot leverage their discretionary powers—like the power to decide how to spend money or how vigorously to pursue a prosecution—to coerce people into trading away fundamental rights like their right to free speech.

Fortunately, the people at Cato know some good constitutional lawyers: us. And so Cato and IJ have joined forces to sue the SEC in a lawsuit that promises to establish that these sorts of gag orders are not just bad policy—they are unconstitutional.

Simply put, the SEC should not be in charge of determining who is allowed to criticize the SEC. The best way for citizens to know that law enforcement officials are not abusing their enormous powers is to ensure that there is vigorous—and free—public debate about how those powers are used. The SEC may think its enforcement activities are perfectly appropriate. Some of its victims disagree. And, if IJ has anything to say about it, soon you’ll be able to read all about it and decide for yourself.

Robert McNamara is an IJ senior attorney.