Are the Courts a Remedy for Nation’s Financial Truth-Tellers?

Are the Courts a Remedy for Nation Financial Truth-Tellers?. 

Politicized boards and commissions with little accountability to the electorate want to deplatform these truth-tellers at every turn. 

This month, the U.S. Supreme Court dealt a blow to the Regulatory State. Financial analysts, fiduciaries, auditors and appraisers should take heart. Those targeted by a growing number of independent agencies, boards and commissions may now immediately challenge an agency’s constitutionality in federal court without having to submit to a drawn-out administrative process that frequently serves only the interests of the agency being challenged.

The decision couldn’t have come soon enough, as an army of assorted technocrats, believers, grand viziers, cronies, hustlers and more than a few out-and-out crooks in government have introduced self-serving ideologies into the federal bureaucracy. America is fast becoming the Ottoman Empire on steroids. This high-court ruling may start to reverse the trend.

Truth-tellers like fiduciaries, auditors, financial analysts, fund managers and appraisers – people hired to render disinterested financial opinions and make good-faith decisions in the interests of others – are increasingly under threat. To these practitioners, the current interference by benighted – or bought – government officials trumpeting vagaries like “social investing” and “equity” feels like a cosmic joke. Politicized boards and commissions with little accountability to the electorate want to deplatform these truth-tellers at every turn.

In Axon Enterprise v. FTC and SEC v. Cochran, private litigants sought to challenge the actions of the Federal Trade Commission and the Securities and Exchange Commission respectively on grounds that the agencies were unconstitutionally structured with too little accountability to the public. But the separate question before the justices was whether the litigants were compelled to first submit to the agencies’ long and costly administrative processes before they could elevate the matter to federal court. That hurdle has now been overcome with the justices’ unanimous decision. Good for them.

But the truth-tellers have always had certain legal arrows in their quiver, such as Section 1983 litigation and the so-called Bivens action. When a citizen’s rights to free speech, due process and equal protection under the law are threatened by a federal official, a state official or private individuals working with government officials, the remedy can potentially be found here.

The 1983 litigation refers to lawsuits brought under Section 1983 of Title 42 of the United States Code (42 U.S.C. § 1983). It provides an individual the right to sue state government employees and others acting “under color of the law” when they violate another’s civil rights (such as the right to free speech enshrined in the First Amendment or the right to due process and equal protection promised by the 14th Amendment).

A Bivens action is a similar type of lawsuit that allows individuals to sue federal officials for damages when their constitutional rights have been violated. Federal officials are typically only sued under Section 1983 if they act alongside state or local officials.

These legal avenues hold government actors accountable.

Under both, victims may, depending on the circumstances, pursue monetary damages or an injunction to stop the improper conduct. Below are some old and new possible remedies:

  • A real property appraiser could sue U.S. Housing and Urban Development Secretary Marcia Fudge and private individuals working with HUD in a Bivens claim if the cabinet secretary’s recent approval of $54 million in grants to 182 nonprofits to combat a make-believe problem known as “appraisal bias” were found to be simply an attempt to chill the protected free speech of appraisers through harassment by private individuals.
  • Citing the recent Axon v. FTC case, an auditor could directly challenge the constitutionality of the Public Company Accounting Oversight Board – an opaque nonprofit imbued with governmental powers by Sarbanes-Oxley. It operates largely outside government scrutiny, yet it acts in the name of government.
  • An investment fiduciary could sue individuals at a state pension regulator under Section 1983 if forced by regulation to advocate so-called “social investing,” thus violating the sole-interest rule that requires fiduciaries to act to maximize financial returns, not to promote social or political causes.
  • Citing Axon, an appraiser could challenge the funding structure of an abusive federal agency known by the long-winded name the Appraisal Subcommittee of the Federal Financial Institutions Examination Council. Exempted from the annual congressional appropriations process, individuals at the agency violate the Constitution’s Spending Clause, and the way it strong-arms states to collect money for its annual budget violates the Commandeering Clause, a provision in the 10th Amendment.
  • A property appraiser could file a Section 1983 lawsuit against individual state licensing board members if the latter conspire to deny the appraiser the right to simply conclude an independent opinion of value, even when the opinion differs from the opinion of an outside “expert” brought in by the board members to gainsay the appraiser.
  • A property appraiser could file a Section 1983 lawsuit against her state licensing board members if she is being disciplined by individuals who are themselves in violation of the state’s administrative procedure act (Texas, California, Washington State, West Virginia, Colorado, Tennessee, South Carolina and Rhode Island are currently among them).

The nation’s financial truth-tellers should not look for help from private companies. Many sectors would like to see them weakened. Nor should they expect help in such challenges by the legion of administrative law attorneys who have carved out a lucrative niche quibbling with unconstitutionally structured boards and commissions on behalf of clients these panels whimsically target.

Jeremy Bagott
Image credit flickr - einalem
Jeremy Bagott

Jeremy Bagott

Jeremy Bagott is a real estate appraiser and former newspaperman. His most recent book, “The Ichthyologist’s Guide to the Subprime Meltdown,” is a concise almanac that distills the cataclysmic financial crisis of 2007-2008 to its essence. This pithy guide to the upheaval includes essays, chronologies, roundups and key lists, weaving together the stories of the politics-infused Freddie and Fannie; the doomed Wall Street investment banks Lehman and Bear Stearns; the dereliction of duty by the Big Three credit-rating services; the mayhem caused by the shadowy nonbank lenders; and the massive government bailouts. It provides a rapid-fire succession of “ah-hah” moments as it lays out the meltdown, convulsion by convulsion.

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8 Responses

  1. I need a good lawyer. The NC Appraisal board did an investigation on one of my reports and found me in violation of the “Board’s Rules” stating I did not provide a complete workfile. When in reality I did send a complete workfile, the NCAB just doesn’t maintain the #1 software that all appraisers use, and thus could not OPEN the workfile. They also put in their “findings” that my adjustments and conclusions were unsupported; but had they been able to open my workfile, it contained all the information needed for one of my Peers to understand and produce similar results. The OMB states that an State or Federal Agency cannot punish an individual for submitting work in an electronic format. A digital workfile is recommended and required for appraisers, yet the NCAB is not required to maintain , have access to, or have knowledge of how to use the software that 90% of appraisers use? The NCAB had a brand new Investigator, as one of his first cases, review my complaint. As a General Appraiser who had no knowledge, experience, or competancy with Residential Appraisal review how could he produce a credible review of my work?The NCAB holds us to the highest standard of USPAP, but when it comes to their actions and their Investigator’s actions they are not required to follow or adhere to USPAP. I have a 9 page document detailing the Violations of USPAP by the NCAB and their Investigator. Let me know if anyone wants to sue a State Appraisal Board, my rights were trampled by their ‘Rules’ and changes need to be made to the NC Appraiser’s Act also such that unsupported, one page emailed complaints to the Board are turned around to the complaintant (In this case Fannie Mae) to provide their own due diligence before being submitted… Not given merit with a lame one line delivery of ” there MIGHT be something wrong with this appraisal”. Last time I checked Fannie Mae had an entire division devoted to Appraiser Quality, why are they not doing the due diligence before it is submitted to the State Board? On Fannie Mae’s website it says “multiple layers of due diligence will be performed Before a report is submitted to a State Board”. My name, email, and phone number are on the report. Shouldn’t one of the Layers of Due Diliigence performed by Fannie Mae be contacting the appraiser???? There needs to be reform in the State Board’s policy to not punish an appraiser for maintaining a required digital file, not use a General Appraiser as an Investigator who does maybe 20 reports a year to review a Residential Appraiser who does 100 reports a Month, and to not accept baseless complaints from a GRE like Fannie Mae unless ample evidence has been provided to support the complaint from the complainant, not just dump it on the NCAB to do the work. Appraisers need to push back against these injustices, and since the motto of the NCAB is to protect the public trust, who will protect the Appraisers?

    • Avatar Eric Kennedy says:

      Contact Mel Black for guidance. Also Mike Ford with AGA is a good resource for this. ALSO NCPAC maybe able to help

    • Amanda, all of what you say may be accurate, but there are two critical things we typically insist on when we try to help appraisers.

      BULLET PROOF workfiles, and a review of the issues at hand.

      Normally I go over these for hours BEFORE workfile submission deadlines pass. Its too late now. There are reasons we take so much time doing this BEFORE anyone meets with boards.

      You are stuck with what you sent them & how you explained it. There is no setting back the clock now. It sounds like you (possibly) got them upset also.

      In general NCAB doesn”t have a bad reputation for being unfair. Usually they are deemed moderately easy to work with, but no one will accuse them of being pushovers.

      Of course anytime you have a new person trying to show what hes made of, you run risks of over exuberance. I wish we had been involved at the outset.

      Having successfully beat California in my own case, I can tell you it costs a small fortune to fight them. Our bill in order to win was $146,000. E&O didn’t come close to covering it for the AMC also involved. Most cases dont cost that much but upward of $50,000 is not uncommon at all.

      Im a general Certified appraiser and without undue modesty I’m probably one of the best residential and 1-4 unit appraisers in the country. (In any case I was hired by the Treasury/IRS out of the top 2% in the country). Dont assume that just because we do commercial, that we didn’t also learn how to properly appraise residential, or that we were not also residential sales agents at some point in our careers. Many successful appraisers diversify to keep steady cash flow. C&I is the gravy (high fees); resdiential and 1-4 is the bread and butter that pays the monthly bills.

      The guy you got MAY well have been incompetent at res. If so then address those specific deficiencies and not overly broad aspersions.

      Either your adjustments were supported by the data visibly evident in the appraisal report itself or they had additional support in your workfile. If you did not pdf it and send it to them, then as hard as it is to accept, the person to be blamed is the person that didn’t follow NC state law. At some level you must have known they were not going to be happy getting data in a format they couldn’t access. When I had my case I had over 690 pages I had to print out from efiles and referenced online sites.

      You can usually get by with PDF files, but sending ACI/Clickforms/Alamode/SFREP/ANOW or any other proprietary software was like waving a red flag in front of a bull.

      FWIW most states dont have to comply with USPAP. AARO advocates a prosecutorial approach rather than a USPAP compliant appraisal review approach. Frankly Mr. Park and I disagree over this one. States can often do as they will. AARO specializes in going outside legislative channels and TAF panders to that.

      Right now as hard as it is, you have to decide to either pay the penalty or fight it. Admin law appeals are very expensive. If you lose then they may well go after your license…and not only a steep fine. Except in extreme cases hiring a lawyer is much more than just paying the fine and biting the bullet. I wish you the best of luck.

      If you are interested in seeing how some of them think, here is a link but it wont help with your current situation.

      There is an ASC /FHFA meeting on discrimination Friday May 19th, 2023. Its discussing bias. You could register online and offer opinions as a woman owned (that makes you a minority owned) business that states ot following USPAP is another form of bias but that is a stretch and I doubt it would change NCABs conclusions in the least.

      As a female owned business owner AND a Latina or Hispanic (IF name is indicative) you MAY have a Hail Mary pass if there is any hint of discrimination or bias in how you were treated. Its a super long shot though.

      IF you can afford it, it s probably going to be much more economical to pay the fine and take the classes. If its significantly above $5,000 then they are seriously upset with you and you may have to do some soul searching career wise.

      I wish I/we could offer more hope and promise but its simply too far into this for us at AGA to be able to help you very much.

      Sorry, but that’s a fact. Thank AARO (which should not exist but it does, and it has undue influence with ASC and FHFA).

      • Avatar Amanda Rivera says:

        Thanks Mike, I still think there is no one protecting appraisers. I didn’t get a fine or an active suspension, but an inactive suspension and have to take a class. But no monetary fine other than having to pay for classes. I just don’t like how they can justify not having appraisal software. Or having to conform to USPAP.

        And an inactive suspension means I can work, but not teach for 2 years, so that does affect my livelihood.

        The investigator called me “Girlie” in my interview, but that just speaks to his age, not really discrimination.

        • If anyone called you girlie in conjunction with any kind of official investigation, you need to file a formal complaint with the Governor and or state auditors office (or A.G.).

          If you or I ever did that we would lose our licenses.

  2. Avatar Eric Kennedy says:

    The King Cobra Strikes. Thanks Jeremy

  3. Baggins Baggins says:

    Once I provided a refinance for a family member of a state board person. An rov was issued by a lender, and this board member wrote up the complaint, trying to pick my report apart. Specifically taking aim at the UAD language, which my rebuttal included describing how the new software functions worked, that there was a drop down list and there were only a half dozen choices. Like most board members at the time, this individual was not keeping up with FNMA’s changes, not subscribed to current software. Just think how convoluted these processes will become when state board members or even lawyers utilize review services on standard general purpose forms, for appraisals developed with this cloud based modernized interactive forms nonsense. Does FNMA think that by issuing new forms, the old forms all go away? I’m still waiting for the new form which I can print out to fill with pen and paper on a clip board.

    Risk vs reward, minimum standards may not be enough in all situations. Getting reports approved by lenders, their underwriters, and even an amc, may be a different process compared to uspap compliance. On the production side the lenders are just looking for minimum standards, the number, the digital UAD review pass, to originate. On the state and independent legal side is where appraisers may be subjected to the most substantial tests.

    Only a decade ago the argument was self contained vs summary report language, appraisers were decrying the notion, considered excessive to provide self contained reporting under amc companies restrictive terms. Self contained approaches are usually in opposition to the notion of outsourcing, discounting, and automation. As one senior appraiser told me which was excellent advice; If something is pertinent to the assignment, make sure it’s in the report.

    A collective class action case bringing a Bivens action against HUD and ASC? I think we’re going to need a specific attorney reference and price of service quote on that one. Dare to dream and I’ll sign up as one of many, but not alone. Appraisers are already long since subjected to restraint of trade by these entities, it’s an up hill climb just to even try to stay in business. Could we include REVAA as a defendant now that they’ve chosen to function as industry advisors like some government to themselves? This article is great because it deals with excess sized runaway government, a lot of that going around lately.

  4. Jeremy can you attend a virtual meeting of ASC (Jim Park) and FHFA on Friday May 19 2023?

    Its a bias solutions meetings. Five ‘witnesses include one particularly evil entity rep from my State. A State regulator appearing representing the pvt corporation AARO who has had a terrible effect on appraisers. AARO is used o do end runs around legislatures since those state employees cant lobby lawmakers directly outside of channels.

    I signed up and am trying to get live mtg attendees in DC area to attend-Late notice.


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Are the Courts a Remedy for Nation’s Financial Truth-Tellers?

by Jeremy Bagott time to read: 4 min