Americans For Civil Rights

Open Letter to the Legislature, the Media, All Licensed Persons, & the Public:

Whether you are a doctor, contractor, realtor, or financial advisor, we all have similar concerns when we are regulated by a governmental agency. No truer words were ever spoken than "we have learned by sad experience that it is the nature and disposition of almost all men, as soon as they get a little authority, as they suppose...they will immediately begin to exercise [excessive and inappropriate authoritarian control]."

Currently there are bills before the legislature to address "disciplinary proceedings" of one agency within the Utah Department of Commerce. However, for the reasons set forth below, the bills are grossly inadequate and do not go far enough to protect the constitutional and civil rights of all licensees under the Department of Commerce, including the Division of Occupational and Professional Licensing, the Division of Real Estate, and the Division of Securities. While the examples below are taken from the Division of Securities, similar abuses occur in the other Divisions, most recently under the Division of Real Estate in the case of Pro-Realty. Doctors are tired of administrative law allowing fraud to be perpetrated on their profession. No licensee is safe in his person, property, or rights until these abuses are corrected.

List of Grievances:

The recitation of grievances below explains why agencies are fundamentally unconstitutional, but this fact is lost on most of the public, licensees, regulators, and legislators. It explains why the public and legislators must be vigilant to preserve for the public their inalienable rights. This stewardship rests not only with the legislator and governor, but with the sovereign public as well. None of us get any of our inalienable rights from any government agency. Indeed, as agents of the government it is their first and overarching duty to secure and protect those rights, and to carry out their mission within the framework of those rights. Unfortunately, there are too many documented instances of regulators using "government immunity" to act "above the law" and without "fair play." Regulators are not above the law, and are accountable for their acts in relation to the public trust reposed in them. This letter is not intended to pursue specific persons for instances of abuse, but to address future abuse and to redress past abuse.

Just a few examples of grievances follow. Each of these may be verified. These are some of the illegal and inappropriate actions taken by at least one agency within the Department of Commerce during the past years. Some of these are cited in the official report by the Utah Legislative Auditor General's Office.

The Salt Lake Tribune, dated July 3, 2008, reported the following under the headline: "Audit: State Securities Division tramples rights of those it regulates" The article continues: "An in-depth investigation of the Utah Securities Division has uncovered what many have long suspected - a state agency that is running amok over the rights of those its regulates... in a scathing review, the Office of the Legislative Auditor General indicates that the [securities] division has stepped far out of bounds. Auditors are calling for widespread reform to correct systemic problems that include:
• Secret investigations in which the targets never get a chance to explain themselves before charges are filed.
• The use of threats and intimidation tactics to coerce cooperation with division investigators.
• Coercive settlement tactics that include keeping unwarranted allegations in cases to be used as bargaining chips for negotiations.
• The division's director is allowed to serve as prosecutor, judge and jury over those the division regulates.
• Fines that are based on ‘making it hurt' rather than being tied to the seriousness of the offense." [words bolded by author]

To add to and elaborate on the above, other abuses follow. These issues have been argued by at least one former Director of the Division as well as a member of the Securities Advisory Board [see Division website.] These other abuses may not have been included in the official report simply because the auditor's report didn't want to "appear to identify specific individuals." [Note: The author of this letter does not know any of the people whose quotations are inserted below. They were all anonymous "Reader's Comments" posted on the S.L. Tribune website.]

1. Inadequate Checks and Balances within Agencies. The agency director is expected to be independent and neutral between the licensees and the public with regard to matters before it, or, how else could an Administrative Law Judge act impartially when he's employed by the Director? Yet, the agency director directly oversees his employee (the hearing judge) and executes the penalty. No wonder that in the four years investigated by the Legislative Auditor General's Office, never once did any defendant-licensee prevail in their defense. For example, the agency director has taken complaints from his attorney to be filed against defendants and "red-lined" (edited) the complaint in order to word it more accusatory and harsh, and to create issues not before conceived. Then the agency acts as judge and executioner under the biased agency director that has already involved himself in the case.

2. Illegal Searches and Seizures. On at least one occasion, the agency violated a person's Constitutional right against illegal search and seizure by coming into a licensee's office, and without notice- confiscated the licensee's computer hard-drive without a search warrant. The computer contained extensive private information about non-affiliated companies and personal family information. The Agency told the licensee "either you let us take this or we will shut you down." The agency required the licensee to sign a written statement, but did not allow the licensee to (1) read the statement, (2) be given a copy of the statement, or (3) ever produce a copy of the signed statement during later legal proceedings, saying "we can't find it." Is not the truth simply that the agency knew their "signed statement" would invalidate the scope of their authority, and nullify their jurisdiction and the allegations in their complaint? Was there complicity with the agency's attorney to suppress such evidence to keep the charges alive?

3. Defamatory and Slanderous Public Statements. First, the agency director himself has made defamatory and slanderous comments in public speeches, citing persons by name, as being guilty of violations of the law when no hearings were ever held or wrong-doing proven, but he did it anyway because the defendant signed a "Stipulation and Consent Order" he could not afford to fight. Second, he even speaks of wrong-doing never alleged in any complaint or mentioned in any consent order! Third, the agency publicly states there had been "Findings of Fact" and "Conclusions at Law" when no such findings or conclusions have ever occurred. Fourth, then the agency publishes press releases, speeches and consent orders on the internet for all to see. And fifth, the Government of the State of Utah pays Google a special fee to make sure they appear at the top of any search!

When people have not had a hearing, and there have been no findings, they may sign an "order" solely so they can go their separate ways, but they do not expect nor deserve to become the agency's "Poster Boy" for fraud when in fact they may be wholly innocent. This is clearly slanderous and defamatory and a breach of a public trust perpetrated by the Government of the State of Utah. It is the agency director boasting publicly for his personal ego, proud in his "accomplishments" that he is "protecting the public" as he recklessly destroys those that cannot fight back. Destroying a reputation is destroying a business, a life, and a family. It goes beyond a monetary fine of any magnitude.

4. Fishing Expeditions. When an agency knows it is going to be unable to prevail in its prosecution, it attempts to find information via a "fishing expedition." A specific example was issuing a written request for all correspondence, letters, notes, memoranda, pictures, conversations, for the previous 15 years between the defendant and, specifically listing the members of the First Presidency of the LDS Church, Quorum of the Twelve, other General, Stake & local leaders, every insurance company the person had been contracted with, every State Insurance Department in America, the Better Business Bureau, Judges, the Internal Revenue Service, the Department of Workforce Services, the State Tax Commission, all private records of current and prior customers, businesses, employees, and immediate family members, listing them each by name. Such a written request is preposterous. To see what a "fishing expedition" looks like when the Commerce Department discovers it does not have a case, and they still want to "get" you, see attached or go here: http://www.americansforcivilrights.com/what-a-fishing-expedition-looks-like.html.

Conversations with religious leaders are confidential and irrelevant. If any other government agency had a problem with the licensee, they could bring their own issue within their own forum and is outside the agency's jurisdiction. Inquiries on employment contracts outside the agency's jurisdiction are irrelevant and are just more efforts to destroy the licensee's career.

The "fishing expeditions" also include calling customers without cause and harassing them into to saying something wrong about the licensee. Read this Reader's Comment posted on the Salt Lake Tribune website anonymously, dated July 5, 2008:

"I am one of those the USD [Utah Securities Division] is ‘concerned for', an investor who chose to invest. We started to hear rumors just before our world crashed down around us. We blame no-one else for our choices. We made them and we were not forced to do so. I was however kept on the phone for nearly 2 hrs one day as someone from the USD tried to coerce, through guided sophistry, information from me - names, phone numbers, etc. with implications of what would happen to the "wrong doers" as well as the settlement I would receive if I would help move along the investigation by providing information. If the rumors we heard are true - which this audit indicates, our family has been hurt, far more, by the USD..."

But, with so many accounts down during 2002, it would be easy to get a few to step-forward to "testify," especially if the Division had been "feeding them" that someone was unlicensed and had committed fraud.

5. Contrived "Fraud." When an agency is having a difficult time proving substance to its case, the agency can file an Amended Complaint that concocts theories "based on no new knowledge or evidence coming to their attention over the previous years." This results in Division officials piling on dozens of additional perjured allegations (made under oath), including newly concocted "fraud" never before alleged. Because years have passed and witnesses move, the respondent is prejudiced and unable to defend himself.

In another well-documented article Utah Securities regulator A. Gary Bowen describes how a seemingly simple situation can be construed as fraud. He explains: "People do not understand the nuance of securities regulation. Most attorneys do not...[know]we can go after these people and we have been just overwhelmed by the filings, you get into my office I've got them practically stacked up to the ceiling and I'm not making this up and I've got them stacked all over the floor so we're pursuing them... I'm going to recommend you look at section 61-1-1 which is entitled ‘Fraud Unlawful' and you're going to discover a definition of fraud that your average attorney is going to be totally clueless about... the nuance that the average attorney doesn't get, who's competent in real estate, competent in corporate or business law, competent in contract law, is the mere omission of a material fact...Do you know what the implication of fraud is? Criminal prosecution, time in jail!"

Mr. Bowen who according to his own representations has been responsible with advising Utah citizens and business owners about how to avoid breaking the law for more than ten years, later admits that it's impossible to pin down what might be construed as "fraud." ["Rogue Agency Arrests Stay-at-Home Utah Mom," www.FreeCapitalist.com.] In other words, if the government wants to press charges, it is permissible to invent them.

6. Improper Use of Authority. An agency is supposedly prohibited from alleging "fraud" while pursuing an "Administrative Complaint." Fraud is only supposed to be alleged in a "Criminal Complaint," and yet entire "administrative" proceedings alleging fraud are run within the licensing area of an agency. If this is not the case, then legislation should require that such a check-and-balance be required within an agency.

7. Over-reaching Beyond Statutory Jurisdiction. The Division has held the position that only those licensed with the Division as Investment Advisors can hold themselves out as "Financial Planners" or "Financial Consultants." It looks for listings in phone books under those topics to find people to pursue. Then the Division makes formal, written requests of CPAs, Certified Financial Planners, CLUs, Chartered Financial Consultants, and others to justify why they are not licensed with the Division. (Investments is only one of 6-8 areas of financial planning, others being estate planning, tax strategies, retirement planning, insurance, cash flow management, business planning, etc.) This is in-line with regulators' objective to oversee the entire financial services industry.

The Agency told them they could not "hold themselves out as a financial planner or financial consultant" as shown by a listing in the phone book. Essentially, the Division denies persons from putting "Certified Financial Planner" or "Chartered Financial Consultant" on their business card, thereby denying them ownership of their private property without due process. How can they take away an accredited diploma rightfully owned?

It seems unwise for the Division to suggest itself competent or with jurisdiction over all areas of financial planning, such as retirement planning, estate planning, tax planning, budgeting, risk management, insurance, college funding, etc. It has neither the competencies nor the jurisdiction to regulate such areas.

8. Intimidation Successfully Exerted. One licensee was repeatedly told by an agency examiner "I don't see anything here that would justify your being terminated by your employer," then, because the employer wanted to protect itself against an agency onslaught, it terminates the employee, and in spite of no new evidence coming forward, the agency files a complaint alleging what are defined as "minor rule violations." The Agency demands 40 times the recommended fine and that the person be barred from the industry. If there was nothing that would warrant being terminated from an employer, what would warrant being barred from the industry? Is this an example of a higher-up in the agency pursuing a personal agenda? Is this an example where the Legislative Auditor's investigation found that the agency sets fines at a level based on "making it hurt" the licensee rather than according to the seriousness of the infraction? Evidence suggests it could be either or both.

9. Creating Customer Complaints. After alleging a customer complaint under oath, the agency is unable to produce a copy of the complaint for 2½ years, and when it is finally does, the wording of the pages-long statement is suspiciously full of industry-specific legalese that suggests someone other than the "complainant" actually wrote the complaint.

10. Piling-on Contrived Allegations. When the agency sensed it was not going to be able to prevail on its 4-5 allegations of minor rule violations, it postpones the hearing when a defense would have been made, and files an Amended Complaint. The Amended Complaint states that it is based on "no new evidence or information" coming to their attention in the previous almost three years, yet they "pile on" some 25 newly concocted allegations of fraud to overwhelm the defendant-licensee. Most of these allegations were based on the defendant-licensee not being "licensed," so virtually everything he had done in the previous 15 years constituted a "fraud" on the public. Remember, it is the agency that keeps the licensing records, so if he weren't appropriately or adequately licensed, then why didn't it allege this three years earlier? A careful reading of the amended complaint shows it contradicts itself repeatedly as it vacillates back and forth between referring to the defendant as licensed and then not licensed. Thus, "without any new information," the agency exposes the lengths it would go to "get" someone. Is this the real reason why the agency pursues certain people? Because of something personal? Javier?

From an anonymous posting on S.L. Tribune's website, July 3, 2008: "It's too bad this department's head had issues with certain brokers/advisors/firms because of something "personal". The word on the street was they fabricated and made up violations and threatened advisors/firms to make a name for themselves and make them look good to there boss'. Is this the real reason why the agency pursues certain people? Because of something personal? If they would spend their time going after those in our industry who are doing things wrong we would all be better off."

It seems every agency has its "Javier." Too often, several of them. The findings of the Legislative Auditor's report document systemic attitudes and abuses existing long before Director Klein, and so pervasive a new director hardly knows what's going on beyond his grasp; thus, it perpetuates the culture from administration-to-administration.

11. Harassment of Relatives' Business. When relatives of a respondent attempt to gain licensure, the agency stonewalls and postpones the licensing process for years, asking for dozens of things not asked of usual applicants, asking for illegal conditions, and after making certain statements and agreements by telephone (recorded), sending follow-up letters stating exactly the opposite to what they stated on the phone, forcing more delay in licensure, and the inability to rightfully begin conducting business. The right to conduct business is not given to the public by any agency of government; it is an inherent retained right never delegated to government. By law, the agency is to license and regulate business, but not overly restrain free trade. In one case, the relatives who have never been licensed before, with wholly clean records, have incurred over $20,000 in legal fees and they still are not licensed for a license that costs about $100.

The examples above are taken from multiple, documented cases of different defendant-licensees. Documents and details of stories can be presented at any hearing. Other abuses within the Department of Commerce allege forgery of documents and instances of illegal wiretapping, but I cannot personally verify such instances, so they are not included in the list above. The list of abuses go on and on... but licensees cannot afford to fight a government agency that can "print its own money." Does the Attorney General's Office help? Perhaps, but its main job is to prosecute cases, and it takes the information fed it by the staff at the department. Where does a person turn to? How can an average person defend himself? The Legislative Auditor's Official Report said that employees within the agency themselves fear to speak-up due to reprisals, and the licensees are certainly fearful of retribution; hence, an unwillingness to speak out on legislation such as this. I have no doubt there may be reprisals against me for speaking up.

The offenses committed above by government employees, many of them criminal in nature, exhibit such a gross abuse of the trust reposed in them that many of the offenses, if performed by a member of the public, would constitute felonies. Yet, it is excused under "governmental immunity," as regulators run roughshod acting "above the law." As shown above, the "win-at-all-costs" style of practicing law, as taught in many law schools and society, and accepted as "fair play" in many courtrooms, means that "anything goes" if they can get away with it, including falsification, and leads to corrupt verdicts, corrupt elections, and corrupt agencies.

For a horrific example of one verified grievance, go to http://daily.freecapitalist.com/2008/09/rogue-agency-arrests-stay-at-home-utah-mom/502 Upon reading this, one would ask, is this America? [Author has neither any affiliation with nor knows the owner of the afore-cited website, but merely references the article.]

If there is a chance the above allegations are true and verifiable, as I have stated, then a governor, agency director, or department head with integrity would be personally embarrassed. If true, such a person of integrity, anyone worthy of any public trust, would have zero tolerance for such shenanigans under his watch, and would instantly take whatever steps necessary to reverse the wrongs. If true, these are serious matters, not to be dismissed as "politically inconvenient."

State Agencies Mimic Federal Agencies: No Excuse

For example, the Utah Securities Division usually acts in tandem with FINRA, the Financial Industry Regulatory Authority. FINRA is the new name of the NASD, the National Association of Securities Dealers, a for-profit privately-owned Self-Regulatory Organization (SRO) under the Securities and Exchange Commission (SEC). FINRA's new name suggests its broadened goal of regulating the entire financial services industry, not just securities dealers. As my old friend, personal client (1986 until his death in 2002) and former Commissioner of the SEC (1995-2001), Norman S. Johnson, a man known for impeccable integrity once told me, FINRA has grown so powerful it often dictates regulations, and what it will and won't do, to the SEC.

As I write, the SEC proposes to adopt Rule 151A which redefines a court-defined insurance product (index annuity) as a security, in deference to FINRA's Rule 05-50, issued in 2005 because securities broker-dealers were losing business to a guaranteed insurance product, wherein principal is guaranteed by the insurance company. Just so no-one is mistaken: its not about consumers or seniors; it's about money and profits.

Thus, what for-profit FINRA, still a National Association of Securities Dealers, could not accomplish in the courts or legislatively (due to the McCarren-Ferguson Act of 1945 mandating regulation of insurance by the states), FINRA is performing an end-around Congress with the SEC doing their bidding. Hence, for insurance agents to be able to continue to sell index annuities they will have to get licensed by and come under the jurisdiction of the NASD, er, a, FINRA. FINRA, state, and federal regulators progress towards their end-objective: oversight of the entire financial services industry.

Again, the Feds usurp state's rights, and federalism, state, and federal laws are circumvented. But, these "land grabs" should be called for what they are, and not tolerated at the federal level or the state level, and strenuously objected to by any conscientious legislator, the media, the courts, licensees, and the public. What happens to one industry happens to all. When regulators take an end-around one law, they will do it again and again. "Activist regulators" override legislatures and Congress as much as "activist judges."

Agencies Running Amuck Cost Utah Jobs

More than one business-owner has expressed the following sentiment:

"I would not dare put my name on this comment. Don't want to be on the "hit list." The UDS is out of control. The audit will probably not change anything. Despite what Mr. Klein says in the article, the goal of the UDS seems to be to prevent the formation of any business entities based in our State. We operate a legitimate business. We have been in business for several years and operate with the highest of standards. We decided we needed to raise some capital to take our business to the next level. WOW! Our Utah based and licensed securities attorney very strongly suggested we move our company out of state and not attempt to raise any capital in Utah. I was shocked! I have always felt despite our tax structure Utah was business friendly. I guess not. We will probably be moving and taking our 100 plus high paying jobs with us. We can't risk pursuing capital formation activities in Utah. Here we could conform to ALL of the rules, go the extra mile to protect our investors, and still be railroaded by UDS years after the fact. Can't GUARANTEE success - it's called RISK capital." [underline ours]

-S.L. Tribune, 7/3/08

Administrative Law is the Responsibility of Legislature

Contrary to what the public might think, protecting our constitutional rights in Administrative Law as exercised by agencies of government does not come under the judiciary, but under the legislative branch of government. Said Utah Supreme Court Chief Justice, Christine Durham: "Thank you for copying me on your Open Letter... I wished to indicate to you that the administrative law system is entirely a creature of the Legislature; it is not a part of the judicial branch of government...Thus, I have no ability to address the problems you describe...and would urge you to direct your concerns to the legislative and executive authorities who control the administrative process." [Email to author, 12/9/08] Constitutionally the Judiciary was entrusted to protect our rights, but now it is up to the legislature to protect rights against an over-reaching department of the Executive Branch. If the issues raised in this letter are accurate, then an exhaustive review of Administrative Law in Utah is obviously needed. Indeed, the outrageous abuse of civil rights under "Administrative Law" would likely have had whole cases thrown-out in civil or criminal courts where constitutional safeguards apply.

Needed Amendments to Proposed Legislation

At lease one anonymous respondent that appeared to have some insight into the investigation posted this Reader's Comment on July 3, 2008:

"What's even more discouraging is that the Auditors office basically dismissed the whole thing. They simply require Francine [Giani, Department of Commerce Head] to present her new 'policies and procedures' to the Legislative Auditor General's Office. The office of the Legislative Auditor General basically swept the whole thing under the rug. I'm disgusted with the Utah Division of Securities. The audit revealed so much, but the Legislative Auditor General's office asked Francine two questions...?! Two?! Nothing toward employee's lawyering up? The division being in disarray, Wayne Klein's resignation, UDS violating Settlement Terms [agreements]....C'mon. I know it's a long weekend but do your job!!! BTW - no follow up appointment was actually scheduled." [brackets are mine]

And if the Tribune reported the response of Department of Commerce head, Francine Giani, correctly, some believe legislation is needed because they feel problems may not be corrected internally. According to the S.L. Tribune, 7/3/08, she reportedly said, "It would have been nice to hear from the other side, to hear from victims who have received money and who think the things the division does is good, and that was not a part of the audit." Some feel that this appears to minimize the problem, and rationalizes and justifies the actions taken. Some feel that she is, in essence, saying: "The ends justify the means. It's okay for government to use criminal tactics and destroy lives of innocent people because, after all, look at all those we help." We don't believe she meant to say that, but that is how it came across to some.

In a "Readers Comment," at least one member of the Securities Advisory Board also defended current practices and criticized the official report. Some feel he also came across as rationalizing the status-quo. [See Readers Comments, S.L. Tribune 7/3/08] No licensee is complaining about the criminal section of the agency going after those committing real fraud. But the investigation wasn't about the criminal section of the agency; it was about the licensing and administrative section of the agency that is "running amuck." When a licensing/administrative case is presented to the Securities Advisory Board to sign-off, the Securities Advisory Board only knows the case (some contrived) presented by the underlings prosecuting a case, assume the information is accurate, sign-off on a settlement, and default on their duty. It's been documented that they may get mis-information. It's as though they deny a pancake has two sides, and only see the upper-side presented to them. Some of the Board appear to have the view that the "ends justify the means." The documented abuses did not happen in a vacuum. No-one appears to be big enough to step-up and take responsibility.

Unfortunately, even after the Legislative Auditor General's official investigation was completed and the report published, the effects of the abuses, and many of the abuses themselves, continue to be perpetuated.
As a result of these abuses, and due to the very nature of the "agency" form of government, we ask that appropriate and needed amendments be added to any bills pending before the legislature that relate to the Department of Commerce. We list them below, along with their rationale. Of course, we realize that the exact wording may be modified to fit needed terminology. They are:

1. Amendment 1 - No Consent Orders that are against the law - Suggested Language: "An agency shall not enter into, nor enforce, any provisions of a Stipulation and/or Consent Order that directly conflicts with any statute."

Rationale: It is not the agency's duty to legislate, nor override the legislature whenever the legislature has directly spoken. An agency should only make rules to carry out the intent of statute, but not to override statute. Likewise, the agency's "Orders" should be bound by and in compliance with the law. In spite of this, at least one agency has repeatedly coerced defendants to give-up their constitutional and state-legislated rights by requiring "Consent Orders" the defendant has no financial means to defend against. Signing such an Order is the sole escape for some that have the agency trample on their rights. Without this, currently pending legislation does not address past abuses the way it should, nor ensure that an agency, including an Oversight Board, will not override the legislature in the future. The Legislative Auditor General's report documents how an "activist regulator" can override statute.

2. Amendment 2 - Provision for Redress of Abuses - Suggested Language: "Those persons that have entered into a Stipulation and Consent Order since January 1, 2002, whether or not a hearing was held, shall have two years from June 1, 2009 to file an appeal of their Order, including a hearing if requested, in an expedited form and manner to be prescribed by an independent Oversight Board." In cases where there have clearly been constitutional abuses, then the unjust penalty has already been meted out, and those cases should simply be thrown out and expunged. An impartial and fair-minded hearing officer or agency director would find such unjust tactics repugnant.

Rationale: The extensive abuses have been and will continue to be documented. The current bills only address potential abuses in the future, but do not right any wrongs of the past. These documented wrongs are widespread and serious. There have been lives destroyed, bankruptcies, 30-year careers and reputations lost (stolen), and many families hurt. The new Oversight Board should re-open cases when it is petitioned. Individuals should have their constitutional rights of true "due process," including the right to a simplified appeal that is not unduly expensive or burdensome.

Said Ronald Reagan: "It is time we realized that socialism can come without overt seizure of property or nationalization of private business. It matters little that you hold the title to your property or business if government can dictate policy and procedure and holds life and death power over your business. The machinery of this power already exists. Lowell Mason, former anti-trust law enforcer for the Federal Trade Commission, has written "American business is being harassed, bled and even blackjacked under a preposterous crazy quilt system of laws." There are so many that the government literally can find some charge to bring against any concern it chooses to prosecute." [Reagan, Ronald, A Time for Choosing, Speech given October 27, 1964]

3. Amendment 3 - No arbitrary or discriminatory rules - Suggested Language: "An agency shall not make, issue, nor enforce any rule that discriminates against, or singles out for special treatment, any other licensed profession except by statute."

Rationale: As an example, the Securities Division, as do most regulatory agencies, argues that they can regulate and issue rules about anything within the area of securities. This sounds logical, but it is not constitutional. Because (a) any regulatory entity or licensing process is fundamentally and by definition a restraint-of-trade and contrary to the commerce clause of the U.S. Constitution, and (b) because the U.S. Supreme Court has repeated held that the Separation of Powers in government which ensure "due process," between the Legislative Branch (rule making), Executive Branch (enforcement), and Judicial Branch (administrative hearings) as occurs within any governmental agency is inherently unconstitutional, thus this "due process" can only be denied citizens when there is a "compelling public interest." This "compelling public interest" test is difficult for the small person to defend against a massive agency that can "print their own money." (Please spare us the argument that government operates on a limited budget - tell that to the small-business owner who has just lost everything.)

For example, the Securities Division has issued rules that basically make every licensed insurance agent in the state of Utah, many thousands of them, criminals. They have shut-down insurance agencies licensed in good standing. Unless the insurance agent comes over and agrees to get licensed by the Division and come under the Division's jurisdiction, the insurance agent is out of business. In the old West, this would be called a "land grab."

And the rule is solely directed at insurance agents - not bankers, not realtors, not car salesmen. It is referred to as the "Source of Funds" rule, wherein the Division says that if an insurance agent receives any commission on an insurance product purchased by money that came from the sale of securities (mutual funds, money market funds, etc.) is in violation of the rule. Note that it is worded so that the customer's needs and wants are ignored. And note that it is worded so that the insurance agent is presumed guilty though no wrong-doing has occurred, except by fiat of the Securities Division. The insurance agent may not even have known where the funds came from! The Securities Division argues that the insurance agent is presumptively, directly or indirectly, "giving investment advice," which sounds rational. But, in reality the Division simply does not like insurance agents collecting commissions because commissions are immoral, and it wants oversight over all areas of financial services.

This faulty reasoning is evidenced by two problems with this approach: First, why is the insurance industry singled out? The effect of this is that all property & casualty agents and life insurance agents can not sell insurance without a securities license. Why can bankers tell their clients to sell their mutual funds and buy CDs, but insurance agents can not tell their customers to sell mutual funds to buy a guaranteed annuity? Why can realtors get a commission when they tell a client to sell their mutual funds to put a down payment on a home? Why can a car salesman get a commission on a car purchased from the sale of mutual funds? Does an Investment Advisor know anything about analyzing insurance needs? Does the legislature intend for the Securities Division to have jurisdiction over other professions that are regulated separately? Is this yet another element to the securities industry's goal to oversee the entire financial services industry?

Second, there exists absolutely no "compelling public interest" to regulate this matter. Thus, because the Division has ignored this constitutional test, it needs to be memorialized in statute. For example, Certified Public Accountants (CPAs) are regulated solely because of the attest function, the audit function. Anyone can do accounting or bookkeeping. Anyone can prepare taxes, such as H&R Block. So, it is solely when financial statements are "attested to" for use by third-parties that the government has asserted a compelling public interest to regulate CPAs. This is as it should be.

Historically, the "compelling public interest" test has been applied. A key historic purpose for the existence of the Securities Division was to regulate securities salespeople that are selling products to people going from safe, guaranteed or insured accounts (bank and insurance products) to risk accounts (securities). Historically, there have been no regulations regarding someone going from risk accounts (securities) to safe and guaranteed accounts (banking and insurance products). The Division changed this rule a few years ago, but so quietly that neither the Utah State Insurance Department nor the insurance industry was aware of it until it was brought to their attention within the past year.

Mature adults are perfectly capable of making decisions to go from risky to safe, and should not be impeded by frivolous regulations. Even senior citizens should not have handicaps to move from risk to safe. In fact, while the Division purports to protect the seniors-retirees, this rule makes it more difficult for seniors to act in their own best interests, to move assets from risky securities to safe CDs or guaranteed insurance products. This is just one example how regulations on licensees adversely affects consumers.

Another example clarifies this unconstitutional rule that has no compelling public interest. As the rule currently exists, a young 30-year old breadwinner cannot sell his mutual funds to purchase life insurance to protect his young family without the agent being held in contempt. Or, a 70 year-old cannot sell his money market funds or mutual funds to purchase the life insurance he needs to pay his estate taxes without the insurance agent being held in contempt. This is not right. Indeed, even a "licensed investment advisor" has no competency or jurisdiction, by virtue of his license, to render opinions or recommendations on such insurance matters. As it stands, the insurance agent has to find a securities broker to recommend the sale of the mutual funds. This is a classic case of "the fox guarding the hen house."

If the Division's rationale were taken to its obvious conclusion, it would be only logical for the Utah State Insurance Department and the Division of Financial Institutions to establish by rule that no securities broker or investment advisor may receive commissions or fees on securities purchased from the sale of fixed annuities or CDs, unless the securities broker or investment advisor becomes licensed as an insurance agent or is employed by a bank. Does every agency have to oversee what is within every other agency's jurisdiction? Where does all the illogic end?

4. Amendment 4 - Definition of Security - Suggested Language: "A security as defined by state statute shall correspond with the definition within the U.S. Securities Act of 1934, as amended."

Rationale: Across America the definition of a security and the scope of authority of state regulatory agencies generally correspond to the federal definition found in the Securities Act of 1934. This definition basically defines securities as investments represented by pieces of paper (documents such as stock certificates, bonds, etc.) that are traded on an exchange. For a complete definition, see footnote 1. It obviously excludes tangible assets, such as precious metals in tangible form (i.e., it excludes coins, bullion, etc., but includes securitized mining stocks, etc.). Historically and currently, this definition prevails throughout the states. However, in Utah the Securities Division has, once again, inserted language into legislation that puts under its jurisdiction classes of physical, tangible assets. This includes an open-ended definition of "precious metals." Is the securities division supposed to be regulating coin shops, coin collectors, and other assets where the buyer and seller have a tangible asset to heft and carry? Isn't the public capable of buying/selling tangible assets? In their non-securitized form? Current legislation creates an unreasonable burden upon business and the public. The division has neither the competency, justifiable jurisdiction, nor compelling public interest to regulate assets that are not defined as securities per common standards. Why does the securities division keep asserting new-found jurisdiction over areas in the financial services industry beyond the range of its competencies?

Another open-ended definition of a "security" that has been inserted into Utah Code is simply "promissory note." As it stands, if a person creates any "promissory note" to sell a car, or lends money to anyone for any reason, even parent to child, the securities division can step in and assert jurisdiction, make claims of fraud and cause all sorts of mischief. If businesses and the public were aware of this open-ended definition, business transactions would come to a standstill, courts would be log-jammed, and securities laws would be mis-applied. Where is the "compelling public interest"? Aren't there enough existing laws to apply to such circumstances? This doesn't only attack another area of the financial services industry, it is an attack on all of business. Do dentists-orthodontists realize that if they have a patient sign a promissory note for orthodontia work, they're subject to securities laws? Does both the seller of a home, or a realtor that helps with it, know they can be charged with fraud on a "seller-financed" home "on contract"? Yes, liable for securities fraud? Did the legislature intend this?

Additional Needed Amendments

5. Legislation that requires that proposed rules and regulations must be published broadly, specifically to those that may be impacted thereby, including their professional associations and societies, and a sufficient period for public comment established. Just as with the legislature, so it is with agencies: in America we do not have a "top-down" form of government, "take it or leave it, like it or not." It is still the voice of the people that is sovereign.

6. Legislation that mandates that rules will not usurp the constitutional rights of those they are designed to regulate. There should exist a "Licensee's Bill of Rights" that explicitly assures licensees that their constitutional rights shall not be infringed. Is this duplicitous? Yes, but agencies need it, and licensees deserve it, for the same reason the U.S. Congress established the "Taxpayer's Bill of Rights" to reign-in an overreaching I.R.S. agency.

7. Legislation to assure the separation of powers within agencies: that rule-making (legislative function), investigations and enforcement (executive function), and adjudication (judicial function), are established and maintained so as to keep a wall between those functions.

8. Legislation that addresses enforcement proceedings for all agencies, including a hearing officer that comes from outside the Department of Commerce. This was the substance of the inadequate H.B. 83 from the 2007-08 legislative session.

9. Legislation that makes the employees of governmental agencies personally liable for (a) disclosure of confidential information, (b) ignoring a court order addressed to the agency, (c) clearly acting outside the scope of their duties, (d) bad faith prosecution or harassment of defendants-respondents or their families, and (e) slanderous and defamatory statements. Such legislation would put no more burden or liability on government employees than currently exist on people in the private sector.

The U.S. "Bill of Rights" does not grant us any rights. Just read it: "Congress shall make no law..." It is actually a uni-directional "Bill of Prohibitions" against government from usurping the inalienable rights retained by the sovereign people. Without legislating boundaries for agencies, bureaucrats are naturally inclined to use a little authority, as they suppose, to exert heavy-handed dominion over those they regulate.

10. Legislation to establish within the Department of Commerce an "Office of Licensee Advocate," with the power to see that rules are followed and to set-aside wrongs in matters of equity; that reports directly to the department head and to the legislature so he can operate independently and impartially. This is needed due to the very nature of agencies where the rule-making, enforcement, and adjudications are underneath the division's director. It is an ombudsman's office with authority to set-aside penalties and fines, similar to the "Office of Taxpayer's Advocate" which the U.S. Congress established in 1998 to address abuses by the I.R.S. (Utah's own Val Oveson was the first appointed "Chief Taxpayer Advocate" for the U.S.) No-one who truly believes in the principles of the U.S. Constitution should have any objection to such a check-and-balance on power.

The U.S. Constitution affords those charged of a criminal offense with the right to legal representation, and usually only results in probation or a short-term loss of liberty. But an agency has (a) no such requirements to provide legal representation, (b) they are trained in "gotcha" tactics which afford no protection like that afforded alleged criminals with the Miranda "reading of rights," (c) can inflict far worse penalties (lifetime loss of livelihood, reputation, etc.) for an inadvertent rule violation as minor as not having the correct wording on an preapproved business card, without any customer ever having been damaged. If anyone thinks this is an extreme example and doesn't happen, then there's beachfront property available in Park City.

Said Alan Greenspan: "The world of [regulation] is reminiscent of Alice's Wonderland: everything seemingly is, yet apparently isn't, simultaneously... It is a world in which the law is so vague that businessmen have no way of knowing whether specific actions will be declared illegal until they hear the judge's verdict - after the fact." [Greenspan, Alan. Later Chairman of the Federal Reserve. Paper given at the Antitrust Seminar of the National Association of Business Economists, Cleveland, September 25, 1961.]

Currently, only after a defendant-licensee has exhausted all hearing processes provided by the agency, and has spent tens or hundreds of thousands of dollars, can he appeal the agency's verdict to a civil court that has procedures and safeguards to operate impartially. The process is wholly contrary to one's constitutional rights, and should be short-circuited within the Department.

11. Legislation that provides that defendants-respondents of complaints brought by the Department of Commerce are assured of their due process rights as guaranteed by the U.S. Constitution, including innocent until proven guilty, and that the burden of proof rests on the government, nor be subject to unreasonable searches and seizures of private property.

12. Legislation that the defendants-respondents of complaints are not subject to penalties that do not fit the infraction, which constitute "cruel and unusual punishment" within the professional realm, given that agencies have power to adjudge mere administrative penalties, fines, and consequences that are often harsher than criminal and civil courts adjudge, penalties that destroy careers, families, and lives. We're not talking here about real fraud, embezzlement, theft or co-mingling of funds, etc., but enforcing rules that are merely administrative in nature.

Administrative law denies citizens their constitutional right to representation: first, administrative law steps out in front of the constitution by proscribing action when no substantive crime against a person has ever been committed, and then, it denies the constitutional right to legal representation for those that otherwise can't afford it, so the unsuspecting respondent can "have his day in court" before an impartial judge. Given this egregious betrayal of our rights by government, one would think there might be one-tenth the procedural rules in administrative law to protect the respondent as there is in civil or criminal courts, but there is not. Shame on those that have allowed this sister system to perpetuate itself, those at the top of our judicial system under whose stewardship exist our rights to protect.

If a licensee had a customer write a letter as this one to him, it would be considered a legitimate "complaint," which he would be required to respond to and address to his customer's satisfaction or to the satisfaction of the regulators (the law). But, can he write such a letter to anyone in government? And have it given the same legitimacy as a complaint written by an attorney admitted to practice before the court? No. Because this double-standard goes top-down, we are treated not as the sovereign "citizens" our Founders intended, but as American "subjects to the (agency) crown." (The word "subjects" is found only once in the U.S. Constitution, and then it was modified by the word "foreign," supposedly because the Founders wanted to make it clear than on American soil there were no such thing as "subjects," but only "citizens.")

It should be noted that one of the reasons agencies and many laws are inherently unconstitutional is because they proscribe actions and presumptively criminalize behaviors that, absent the government fiat, would not constitute a crime. These rules are established prior to any real crime having been committed against others; that is, agency rules are designed to prevent a crime against others before one occurs. Any time the government proscribes actions before a real crime has actually been committed, the government is treading on the thin ice of infringing on the basic freedom of conscience: of proscribing belief, expressing opinions, free speech, freedom of assembly, and other fundamental freedoms explicitly retained by the people. Though the U.S. Constitution has been chipped-away at for 221 years, that is no justification to continue to ignore it, ignorantly or consciously. It is either inspired genius or not. We either defend it or not.

13. Legislation that provides that no agency shall publicize or memorialize any misleading statement, including allegations enumerated in a Consent Order, in a manner that refers to such mere allegations as "Findings of Fact" or "Conclusions at Law," unless there was a formal hearing, and there were actually adjudicated such findings and conclusions by an independent hearing officer. The legislation should stipulate that existing Consent Orders and Press Releases so worded be removed from the internet immediately.

14. No agency shall issue or promulgate any rules or regulations for which there does not exist a "compelling public interest" sufficient to warrant regulation or licensing by an agency. The Supreme Court cases addressing this makes this "the test" to justify the mere existence of governmental agencies where the "separation of powers" are blurred, and constitutionally guaranteed checks and balances are lost. This test has been thrown out in favor of the false belief by legislators and regulators that "if it has anything to do with this agency, we can regulate it." The Utah State Government must get out of regulating areas where there is not a "compelling public interest" to do so, and abide by the test established by the U.S. Supreme Court.

What Do We Want?

1. We want the 14 constitutional protections above incorporated into pending legislation.
2. In consideration of the abuses above, we want our careers back and our records cleaned, no-strings attached. We want our records expunged and to resume our careers and re-build the businesses we had built over years with our sweat and sound reputations.
3. We want the government to clean-house so these abuses are not perpetuated. This will take more than legislation or new policies and procedures; it will require changes not merely at the top of the divisions, but also changes among the staff offenders that have similar attitudes and abuse their positions of trust from administration-to-administration. There is full and just "cause" to clean house.
4. Let's not twist the facts: reputations were not "lost," they were "taken." We want reputations returned to those who have had their civil rights trampled upon. This can start with a letter of apology. Who is big enough to accept responsibility for these documented abuses under their watch?

The four items above can not restore what's been taken, and any penalty has already been exacted 1,000-fold. As mentioned, the abuse of rights under "Administrative Law" would have had whole cases thrown-out in civil or criminal courts where safeguards apply.

Licensees deserve an agency that is helpful to conscientious professionals doing their best to abide by the laws and rules of society, and not an adversarial "gotcha" government attitude. Licensees are not looking for pussy-cat oversight, but also do not deserve a "pit-bull watchdog" that knows no other style but attack-mode.

In Summary, while existing bills to reform disciplinary proceedings within one agency are laudable, they are insufficient because they do not correct past abuses, nor establish a framework to prevent problems up-front with overreaching agencies. Licensees deserve a "guardrail along the road up-above, not merely an ambulance down in the canyon" after the damage has been done. It has been suggested that addressing these problems be taken "piecemeal, over time." We do not believe this will happen, just as the American Colonists insisted the Bill of Rights be included prior to adoption of the U.S. Constitution. Therefore, with all due respect to well-intentioned persons, we have no choice but to marshal all resources possible to strenuously oppose any pending legislation until it contains the 14 amendments above, thereby guaranteeing licensees of all professions their constitutional and civil rights under the law.

If you are concerned about the issues above, here are things you can do to help:

1. Forward this letter to everyone you know who are licensees of whatever occupation, business-
owners, media, and others that might share an interest or be affected by these issues.

2. Contact - today - your elected representatives, and those with stewardship to oversee faithful
execution of administrative laws in Utah. Be sure you communicate clearly, politely, and respectfully.

3. Contact those working directly on the legislation which does not currently include these provisions.

Senator Lyle Hillyard is carrying the legislation proposed by the Department of Commerce, and Representative Jim Bird is carrying legislation that was proposed last year.

Senator Hillyard: Office 435-752-2610, Home 435-753-0043, Fax (435)753-8895, This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Representative Bird: Office 801-282-4112, Home 801-280-9056, This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

4. Take five minutes to send your comments to members of the Leadership of the House and Senate, the
Rules Committee, and the Business/Commerce Committee. Their contact information is above. Once again, please be clear, polite, and respectful of their time and position. Tell them how you feel, and ask them to include the above amendments to proposed legislation. If you attach this letter to your email, please be sure to add your own feelings and comments before the letter.

5. If you would like to help in these efforts, please call 866-895-0451. If you are a member of a
professional association and we have not yet contacted you, ask your association officer to call us also.

6. Sign this petition that will be sent to legislators: http://www.americansforcivilrights.com/petition-to-legislature.html.

7. Track the bills carefully at http://le.utah.gov/asp/billtrack/track.asp. Help us continue to follow-up.

8. If you are a licensee or member of the public that has a story to share, please call or post it online at:
www.AmericansForCivilRights.com.

We need everyone's help of both time and means to stop the abuses that affect not only the licensed professionals, but our customers as well. For more information or to contribute, visit us online.

Sincerely,

Footnote 1: An investment instrument, other than an insurance policy or fixed annuity, issued by a corporation, government, or other organization which offers evidence of debt or equity. The official definition, from the Securities Exchange Act of 1934, is: "Any note, stock, treasury stock, bond, debenture, certificate of interest or participation in any profit-sharing agreement or in any oil, gas, or other mineral royalty or lease, any collateral trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit, for a security, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or in general, any instrument commonly known as a 'security'; or any certificate of interest or participation in, temporary or interim certificate for, receipt for, or warrant or right to subscribe to or purchase, any of the foregoing; but shall not include currency or any note, draft, bill of exchange, or banker's acceptance which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited."

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