March 26 (Reuters) - The U.S. Securities and Exchange Commission on Tuesday defended a press release it had issued about its case against an investment adviser, after a Boston federal judge raised concerns that it could taint the adviser’s upcoming separate criminal trial on a tax matter.
The SEC’s filing came after U.S. District Judge Mark Wolf issued an order last week compelling SEC attorney Julie Riewe to explain why her comments about investment adviser Gregg Caplitz did not violate the court’s rules prohibiting lawyers from making “extrajudicial statements” that could taint a jury pool.
Riewe’s comments were contained in a March 18 press release saying that the SEC had obtained an emergency order to freeze Caplitz’s assets. It alleged that he and his firm used $1.1 million raised from investors for purposes other than the hedge fund they claimed to manage.
Riewe was quoted as saying that Caplitz had “conjured up a hedge fund to lure long-time clients” when it was “nothing more than a slush fund to pay bills for others.”
The SEC told the judge on Tuesday that this statement “was reviewed and approved by Ms. Riewe’s supervisors” and that it would not violate the court’s rules because “it does not go beyond the public record and therefore cannot impact the defendant’s right to a fair trial.”
The SEC noted that its complaint against Caplitz was public at the time of the press release.
Wolf raised concerns about the SEC’s press release because Caplitz is a defendant in a separate criminal tax case that is slated for trial in September in the same federal court district.
Legal experts say Riewe has become ensnared in a rare and unusually strict enforcement of a local court rule that some believe is at odds with constitutional protections for free speech.
On the few occasions when similar rules have been enforced by judges in the past, they tended to involve high-profile criminal matters.
But in this case, Wolf, who is well-known for challenging government parties in the past, is taking the unusual step of raising it in a civil case.
The court’s rule generally prohibits lawyers from making public statements that could interfere with a fair trial.
The SEC, in its defense of the release, said the document served an important public interest for investors to notify them of potential fraud, and in fact a former client of Caplitz had even called to thank the government for its work.
In addition, the SEC added that the pending criminal case against Caplitz involves completely different conduct pertaining to filing false tax returns. The SEC’s statement “did not comment on any aspect of those pending tax fraud charges,” the SEC said.
The SEC did say, however, that it had nevertheless removed the statement from the online version of the press release “in light of the court’s concerns.”
It is unclear now how Judge Wolf will react to the SEC’s explanation of the press release.
Those who have practiced before him say he is a stickler for rules, and can be known to give government lawyers a hard time if he is not satisfied with the answers he receives.
Wolf had asked Riewe to file an affidavit addressing whether she knew Caplitz was facing an upcoming criminal trial and whether she had communicated with federal agents.
In a filing, Riewe told the judge she was aware Caplitz had been indicted, but that neither she nor other SEC attorneys had cooperated with agents or attorneys handling the tax matter.
However, the SEC staff has been cooperating with other government agents concerning the conduct outlined in the SEC’s complaint, and there is a parallel criminal investigation.