The Securities and Exchange Commission got a dose of its own medicine Monday when a federal judge in Dallas issued a preliminary injunction prohibiting the agency from violating the rights of members of the billionaire Hunt family.
Judge Robert Porter said SEC investigators "acted with reckless disregard" for the Hunt's right to keep their finances private and were guilty of "gross violation" of federal privacy laws.
Porter, however, refused to block a major SEC investigation of the Hunts' dealings in the silver market last year.
Instead, the judge prescribed the same remedy the SEC often demands when it accuses a corporation of violating securities regulations: a court order prohibiting any future violations of the law.
Like the defendants in SEC investigations, SEC lawyers argued that the injunction was not necessary because they had mended their ways and would not break the law again.
The Hunts hailed the decision as a major victory. "The court has confirmed the Hunt charges that the Sec has broken the law over and over again," William Herbert Hunt said in a statement issued by a family spokesman.
He noted that the court decision allows the Hunts to continue to counterattack against the SEC. Hunt lawyers were authorized to demand access to SEC records of the investigation and Hunt said this will "probably establish that other SEC staff members and officers are guilty of wrongful acts."
Regardless of whether they catch the SEC in other violations, the Hunts' continuing legal challenge to the silver investigation could further ensnarl government attorneys, who have already spent months fighting the Hunts on the privacy issue.
SEC officials said Judge Porter's ruling will enable the agency to continue its silver probe. "The order authorizes us to go forward with our investigation and we intend to do so," said an attorney in SEC's enforcement division.
The Hunts had effectively shut down the SEC probe for the last four months and had embarrassed the highly regarded SEC enforcement staff by showing the SEC repeatedly failed to follow federal privacy regulations.
William Herbert Hunt, his brothers Nelson Bunker and Lamar and other family members sued the SEC in March under the Federal Right to Financial Privacy Act.