A recorded call reveals the outcome may have been decided before the hearing.
Before the FINRA hearing, a phone call took place between Manuel Fernandez’s attorney and Josh Doolittle, the lead FINRA investigator assigned to the case. The call was recorded.
What the investigator said on that call goes to the heart of whether the proceeding was fair. His words suggest the outcome was already decided.
“Uh, well, so the difference would be that there would possibly be, uh, findings in that settlement that relate to the fundraising and what happened to those funds. Whereas if we did it at this stage and it were on the basis of, you know, not providing those records, instead, it would say we made a request for certain records related to fundraising and, and the use of the proceed and the portal, and Mr. Fernandez said they would not provide, right. So there’s no findings of the actual issues that arise from that fundraising of what happened to the money. It’s just the fact that we asked for related to it. And those were not provided.”
Josh Doolittle, Lead FINRA Enforcement Investigator — Transcript at pages 3–4, Applicants’ Opening Brief, File No. 3-20639 (June 9, 2022)
The investigator stated plainly that the result — a lifetime ban — was already determined. The question was never whether the ban would happen. It was only a question of how FINRA would write up its findings.
Document production would not change the outcome. It would only change the language FINRA used to justify what it had already decided to do.
The Commission’s own standard requires that sanctions be remedial — not punitive. A sanction imposed to punish non-cooperation with an investigation, rather than to remediate investor harm, is a penalty under Kokesh v. SEC, 137 S. Ct. 1635 (2017). The D.C. Circuit has required the Commission to address this distinction before affirming a lifetime bar. Saad v. SEC, 873 F.3d 297 (D.C. Cir. 2017). FINRA’s own lead investigator confirmed on tape that the purpose of Bar One was not investor protection — it was to punish non-production of documents. The Commission’s order affirming Bar One does not address this evidence. Under Motor Vehicle Manufacturers Association v. State Farm, 463 U.S. 29, 43 (1983), an agency decision that ignores directly contradictory evidence in the record is arbitrary and capricious and cannot stand.
The recording is cited in the Applicants’ Opening Brief filed June 9, 2022, at pages 3–4. It is part of the official record before the SEC in Administrative Proceeding No. 3-20639.
The brief describes the call and quotes the investigator’s statements. These facts are in the public file and available for review.
Due process requires that decision-makers be impartial. A predetermined outcome means the proceeding was not fair. The person being judged never had a real chance.
When the person investigating you says the punishment is already decided, the hearing becomes a performance. Not a process.
The Fifth Amendment guarantees due process. The Fourteenth Amendment extends it to state actors. FINRA exercises government-delegated authority over the securities industry.