Judicial Watch More Important Than Ever!

[INSIDE JW]

PRESIDENT-ELECT BIDEN CERTIFIED

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To give some perspective on the controversies we’ve witnessed in
this election, remember that four years ago this week Obama, Biden and
Comey were talking about spying on and targeting Donald Trump and his
team for prosecution.

In my view, the election results in the various battleground states
were compromised by unlawful rule changes that led to votes being
counted that shouldn't have been counted. State legislatures, the
courts – in particular the Supreme Court – and Congress failed to
seriously grapple with these and other problems. It is shameful. And
the inexcusable and deadly violence at the U.S. Capitol is being used
by the Left to suppress all its conservative and other principled
opposition. The Leftists at Big Tech are banning conservatives for
even talking about election fraud!

The Left is even talking about impeachment again! They don’t, as
they claim, want to remove our president because he incited violence.
He didn't – and they don't care much about violence as they endorse
and use it regularly. No, they want to abuse impeachment again to
undermine someone who is likely to be an effective opposition voice.

So, as we look ahead, you won’t be able to rely on the corrupt media
or Congress to hold the government to account. Judicial Watch will be
only game in town, more or less, when it comes to investigating and
litigating over government corruption in the new Biden administration.

OVER 4,700 GEORGIA ABSENTEE VOTES TIED TO NON-RESIDENTIAL ADDRESSES

You can trust Judicial Watch to investigate and expose the conduct of
the 2020 elections. Our efforts are well underway with dozens of open
records requests and other investigations.

For example, we just collected voter data showing that more than 4,700
absentee voters in the presidential election
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listed non-residential addresses as their places of residence. Georgia
law requires
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citizens registering to vote to reside “in that place in which such
person’s habitation is fixed …”

We shared our data with the Georgia Secretary of State and requested
an investigation.

A total of 9,989 Georgia voters seem to be registered at
non-residential addresses: 1,882 at commercial addresses, 1,336
registered at county and state governmental buildings, and 6,735 at
either hotels or motels.

Additionally, 215 new registrations (between November 4-December 14)
for the special election are linked to non-residential addresses.

We previously alerted the Georgia Secretary of Office to the voter
registration address issue in April 2020.

This issue must be immediately investigated. We are concerned about
the impact on Georgia’s elections in November and earlier this week.

This is part of our years-long effort to clean up voter rolls.

In September 2020, we released a study
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revealing that 353 U.S. counties had 1.8 million more registered
voters than eligible voting-age citizens. In other words, the
registration rates of those counties exceeded 100% of eligible voters.


In Georgia: Bryan County (118%); Forsyth County (114%); Dawson County
(113%); Oconee County (111%); Fayette County (111%); Fulton County
(109%); Cherokee County (109%); Jackson County (107%); Henry County
(106%); Lee County (106%); Morgan County (105%); Clayton County
(105%); DeKalb County (105%); Gwinnett County (104%); Greene County
(104%); Cobb County (104%); Effingham County (103%); Walton County
(102%); Rockdale County (102%); Barrow County (101%); Douglas County
(101%); Newton County (100%); Hall County (100%)

You can learn more about our election efforts here
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INACTIVE REGISTRATIONS STAYED ON KENTUCKY ROLLS DESPITE CONSENT DECREE

Even when Judicial Watch succeeds in court to ensure better election
integrity, we face continued battles from government officials who try
to undermine our success.

The U.S. District Court for the Eastern District of Kentucky has
agreed
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that Kentucky’s former Democrat Secretary of State Alison Lundergan
Grimes breached the terms
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of a National Voter Registration Act (NVRA) Consent Judgment
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with us.

She delayed sending out voter notices, which allowed the names of
people who have died or moved away to remain on the Commonwealth’s
voter rolls.

As a result of the breach, District Court Judge Gregory F. Van
Tatenhove extended the judgment beyond its termination date from
October 31, 2023, to March 31, 2025, which allows it to encompass one
additional federal election. Kentucky is set to remove over 250,000
names from the voter rolls under the terms of the consent judgment.

By breaching the court’s decree and delaying sending out voter
notices before a critical deadline, Kentucky allowed outdated
registrations to remain on the rolls through the 2022 midterm federal
elections, two years longer than Kentucky agreed to in the original
judgment.

This latest court ruling comes in our 2017 lawsuit
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under the NVRA (_Judicial Watch, Inc. and the United States of America
v. Alison Lundergan Grimes, et al._
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(No. 3:17-cv-00094)). (The original defendant has since been replaced
by Michael Adams, the new secretary of state elected in November
2019.) In June 2018, with our agreement, the Justice Department moved
to intervene in the lawsuit against Kentucky.

The court agreed with us that “the initial Defendants breached
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the Consent Judgment” by failing to send address notices in time:

Since [the secretary of state’s office] failed to follow up with the
[lawfully required] notices … registrations belonging to those with
a change of address cannot be cancelled after the November 2020
election.… Therefore, this inaction delayed Kentucky’s progress
toward “ensuring an accurate and current voter registration” list,
one of the main purposes of the NVRA and Consent Judgment.

For years prior to entering into the Consent Judgment, Kentucky had
been in violation of the NVRA’s requirement to keep its voter rolls
up to date, which forced us to sue to bring the Bluegrass State into
compliance with the law. Our lawsuit against Kentucky alleged that 48
counties had more registered voters than citizens over the age of 18.
The suit noted that Kentucky was then one of only three states in
which the statewide active registration rate was greater than 100% of
the age-eligible citizen population.

In signing the Consent Judgment
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Kentucky acknowledged
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[T]he practices currently in place in Kentucky do not comply with the
NVRA’s requirement that states conduct a general voter registration
list maintenance program that makes a reasonable effort to remove
ineligible persons from the voter rolls due to a change in residence
outside of the jurisdiction …

Why would a leftist secretary of state purposefully allow ineligible
names to remain on Kentucky’s voter rolls in violation of a federal
court’s consent decree? We know, don’t we? Dirty voting rolls make
it easier to steal elections. That’s why our litigation to clean up
rolls across America is urgent.

JUDICIAL WATCH EXPOSES A $1 BILLION MASK DEAL BETWEEN CALIFORNIA AND
CHINESE COMPANY

Judicial Watch could spend all our time on the accountability and
corruption issues tied the coronavirus issue.

We received 848 pages
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of
documents revealing the details of a $1 billion contract for face
masks between the California Office of Emergency Services and the
Chinese Communist Party linked BYD
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BYD is controversial
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[T]he first company the FDA approved has been prohibited
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by law from bidding for some federal contracts in the United States.
Although the company, BYD, is a major global player in the electric
vehicle and lithium battery markets, it also has glaring red flags on
its record, experts warn, including a history of supplying allegedly
faulty products to the U.S., ties to the Chinese military and
Communist Party, and possible links to forced labor. BYD also has no
history of making personal protective equipment …

Moreover, the documents reveal that the Office of Emergency Services
Assistant Chief Counsel admits that they deviated from their normal
procurement process for this contract. Additionally, in the contract
between Office of Emergency Services and BYD, BYD uses a different
name, Global Healthcare Product Solutions, LLC., and BYD provides no
liability or warranty for the masks if they are faulty.

The records were produced in response to our California Public Records
request sent to the California Governor’s Office of Emergency
Services for all records and communications related to the state’s
contract for masks with BYD.

The records include an April 7, 2020, email
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from the Office of Emergency Services Assistant Chief Counsel Jennifer
Bollinger to Oscar Su, Senior Director of BYD America, in which
Bollinger states, “Our normal procurement process has been deviated
from given the exigency of the situation.”

In an April 6, 2020, email
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Stella Lu, the president of BYD Motors (the guarantor of the masks)
tells Mark Ghilarducci, the director of the Office of Emergency
Services that they should, “open champagne tomorrow morning at our
conference call,” where they will finalize the purchase by
California of $1 billion worth of BYD masks.

On April 7, John Zhuang, counsel for BYD and BYD’s lead negotiator,
sent
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the finalized contracts to Bollinger, who led the negotiations for the
Office of Emergency Services. Bollinger replied, “This is very
exciting!!! We will circle back today with the signature as soon as we
can.”

In an amendment
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to the master agreement, BYD had to refund $247 million to California
of the $495 million down payment they had received apparently because
they weren’t able to meet the deadline of receiving National
Institute for Occupational Safety and Health (NIOSH) certification for
their N95 masks. The certification deadline was extended from April
30, 2020, to May 31, 2020.

On March 28, 2020, Brian Stansbury, a member of the board of the San
Francisco Employees’ Retirement System, emailed
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Grady Joseph of the CA Office of Emergency Services and Paul Teng of
Himalaya Capital in order to introduce Joseph to Teng, saying,
“Grady as we discussed the pension system for the City of San
Francisco – the San Francisco Employees’ Retirement System (SFERS)
– reached out to our investment partners to see how they can help in
the fight against COVID-19.

Teng responded, offering to assist with the procurement of N95 masks:
“Paul I would like to introduce Grady Joseph Assistant Director of
Recovery Operations for Cal OES from the Governor’s Office of
Emergency Services. We know Grady is in good hands and want to thank
you for your partnership.”

Teng later responds
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“Hi Grady, nice to meet you through email though I wish it was under
better circumstances. We have a deep relationship with BYD which is
now the largest mask maker in the world capable of producing 10MM
masks a day. I have just facilitated an order between BYD [redacted]
to procure 4 MM in N95 masks and 3 MM surgical masks that will be
delivered over the next three weeks or so in batches. Happy to make
the same connection as well. My number is below if you need to reach
me.”

Brian Stansbury, a member of the board of San Francisco Employees
Retirement System (SFERS), introduced
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Paul Teng of Himalaya Capital (with whom SFERS reportedly had invested
$200 million
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and which Stansbury calls their “investment partners”), to Grady
Joseph, Office of Emergency Services Asst. Director Of Recovery
Operations to help in the procurement of face masks. Teng tells Joseph
that Himalaya has a “deep relationship” with BYD, which he claims,
“is now the largest mask maker in the world.” Oscar Su, a BYD
executive introduced by Teng to Joseph and another Office of Emergency
Services official, responds, “Thanks Paul for the introduction.”

According to the “Equipment Master Supply Purchase Order
Agreement” effective April 7, 2020, BYD lists the “Seller” to
the State of California as a Wilmington, DE-based company called
Global Healthcare Product Solutions, LLC. The contract
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states that the “Buyer will support the Seller’s efforts to obtain
the National Institute for Occupation Safety and Health (“NIOSH”)
certification for the N95 masks purchased under this Agreement.” A
provision of the contract calls for BYD Motors, a subsidiary of BYD
Co, Ltd, to be the Guarantor of the contract, in the event the Seller
breached the “Guaranteed Material Obligation” of the contract.

Pursuant to a “Sweatfree Code of Conduct” provision
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of the contract, the Seller guarantees that no material furnished to
the Buyer “have been produced in whole or in part by sweatshop
labor, forced labor, convict labor, indentured labor under penal
sanction, abusive forms of child labor or exploitation of children in
sweatshop labor…” In a “Nondiscrimination” clause of the
contract, the Seller agrees to not “unlawfully discriminate”
against any employee based on “ancestry” or “religious creed.”
The provision also calls for the Seller to adhere to the “Fair
Employment and Housing Act.”

California’s Office of Emergency Services had to provide a 50% down
payment totaling $495 million
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(one-half of the total $990 million contract) under the payment terms
of the contract.

According to a purchase order
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Global Healthcare Product Solutions (the Seller) is a subsidiary of
BYD International Development based in Los Angeles. BYD was to supply
300 million N95 masks at a unit price of $3.30 each.

In an April 3, 2020, email exchange
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between Bollinger and BYD’s counsel, Zhuang, Bollinger asks Zhuang
why BYD is using a company called “Global Healthcare Product
Solutions, LLC” as the “contracting entity” for the masks. She
notes that “I understood this to be a contract directly with BYD
North America.” Zhuang then responds, saying, “BYD’s contract
manufacturing division started Global Healthcare Product Solutions
earlier this year to sell healthcare products in the US … They
picked the name because they wanted folks to recognize it as a
business that sold healthcare products, not to be conflated with the
EV [Electric Vehicle] / clean energy business.”

In the master agreement, under “Limits of Liability
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section, the contract notes that “In no event shall Seller be liable
for any consequential, special, incidental, indirect or punitive
damages …” In the contract provision titled “Limits on
Warranty,” the contract notes that Seller … makes no warranties or
representations … as to the Equipment … provided for under this
Agreement …” The contract contains a provision that “Seller
warrants that no gratuities … were offered or given by the Seller,
or any agent or representative of the Seller, to any officer or
employee of the Buyer with a view toward securing the Agreement …”

California purchased a total of 300 million N95 masks from BYD for
$990 million
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on April 7, 2020.

In an April 2, 2020, email
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Trevor Houser
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of
“Frontline Support
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connects
multiple BYD and the Office of Emergency Services representatives.
Frontline Support shares the same address
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in Oakland, CA, as Rhodium Group, where Trevor Houser is listed as a
partner. Rhodium describes itself as “an independent research
provider” combining “economic data and policy insight to analyze
global trends.”

In an April 24, 2020, email
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Shige Honjo from “Frontline Support” provided advice/directives to
BYD on quality control measures for the masks that were to be provided
to the Office of Emergency Services, describing various metrics that
BYD should supply to ensure that the masks being provided met certain
standards. These metrics included, “Product cleanliness spec –
number and size of particles allowed, blemish, etc.” and
“Reliability specs – when does filtration become no good, how many
times can the straps be stretched out, etc.”

The BYD representative in charge of handling shipments of the masks to
the Office of Emergency Services is Sean Li
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Procurement and Logistic Supervisor of BYD Coach and Bus LLC.

In an email
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on March 21, 2020, a California lobbyist named Mark Weideman sent Gov.
Newsom’s Chief of Staff, Ann O’Leary, a copy of an article
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BYD titled “A Chinese Electric Car Maker Backed by Warren Buffett
Re-Tooled to Make Face Masks When Covid-19 Hit – Now It Says It’s
the World’s Largest Mask Factory.” Weideman says in his email that
BYD was willing to “donate” 50,000 masks to California, along with
hand sanitizer, and asked if someone could “notify GGN”
[presumably Governor Gavin Newsom] so they could “hopefully execute
on BYD’s offer to help California, a place they and their unionized
workforce call home for their North American operations.” Abby
Browning of the Office of Emergency Services responds to Weideman,
noting she’d been forwarded his email from O’Leary, and said, “I
am happy to help you facilitate this donation.” Weideman replies to
Browning, “Yes, address and receiving information would be great. I
am copying Frank Girardot and Nancy Liu with BYD who can help
coordinate logistics.”

In an April 24, 2020, email exchange
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among the Office of Emergency Services officials handling delivery of
3.4 million masks from BYD, CA Office of Emergency Services Dep.
Director Mitchell Medigovich notes that “The physical count will be
at the airport and upon movement into the warehouse for inventory and
QC [quality control], we will notify receipt and if there are any
deficiencies. We are only checking 1% due to volume.”

These documents show how a well-connected and controversial Chinese
firm was able to get a leg up on a billion-dollar mask contract with
California politicians.

NASDAQ WANTS TO REQUIRE MINORITY AND FEMALE DIRECTORS FOR MEMBERS

We filed a public comment
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with the Securities and Exchange Commission (SEC) in response to a
proposed rule change requiring race and gender quotas on the boards of
corporations listed on the Nasdaq exchange. The proposed rule would
require a self-identifying female and a self-identifying member of
certain listed racial backgrounds, or an explanation from the company
as to why it does not have at least two directors on its board who
self-identify as such.

In September 2020, we also filed a taxpayer lawsuit
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in
the Superior Court of the State of California County of Los Angeles to
prevent California from enforcing Assembly Bill 979 (AB 979), which
requires that boards of directors of California-based, publicly held
domestic or foreign corporations satisfy racial, ethnicity, sexual
preference and transgender status quotas by the end of the 2021
calendar year (_Robin Crest, et al. v. Alex Padilla, in his official
capacity as Secretary of State of the State of California
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(No.20ST-CV-37513)).

In a related case, we are prosecuting a taxpayer lawsuit
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that challenges California’s gender quotas (_Crest et al. v.
Padilla_
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(No.19ST-CV-27561)). In June 2020, in a major development, the court
held
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that Judicial Watch’s clients have standing to sue under state law
and Judicial Watch attorneys are now in discovery.

In our comment to the Securities and Exchange Commission we explained
that the proposed rule regulating Nasdaq corporations violates the
equal protection component of the Fifth Amendment’s Due Process
Clause: “At the heart of the Constitution’s guarantee of equal
protection lies the simple command that the Government must treat
citizens as individuals, not as simply components of a racial,
religious, sexual or national class.”

Race and gender quotas are brazenly unconstitutional, and NASDAQ’s
proposed rule must be rejected by the SEC. You can expect more
litigation if this discriminatory proposal moves forward.”

Here is our comment to the SEC:

Dear Secretary Countryman:

Judicial Watch, Inc. is a non-partisan, not-for-profit, public
interest organization headquartered in Washington, DC. Founded in
1994, Judicial Watch seeks to promote accountability, transparency and
integrity in government, and fidelity to the rule of law. In
furtherance of these goals, Judicial Watch files public comments and
amicus curiae briefs on issues involving civil rights as well as
prosecutes lawsuits on matters it believes are of public importance.
Judicial Watch respectfully submits this comment in opposition to
Nasdaq’s Proposed Rule Change to Adopt Listing Rules Related to
Board Diversity. We urge the SEC to decline adopting the Proposed Rule
because it violates the Fifth Amendment to the U.S. Constitution,
requires companies listed on Nasdaq to discriminate, and will likely
lead to extensive litigation. In addition, Judicial Watch is concerned
about potential conflicts of interest related to the Proposed Rule as
Nasdaq also has recently announced a partnership with Equilar to
provide services to listed companies that have not met the Proposed
Rule’s “diversity objectives.”

I. THE PROPOSED RULE VIOLATES THE FIFTH AMENDMENT OF THE U.S.
CONSTITUTION.

Although the Fifth Amendment, unlike the Fourteenth Amendment, does
not have an express equal protection clause, the Supreme Court has
held that “[t]he reach of the equal protection guarantee of the
Fifth Amendment is coextensive with that of the Fourteenth.” _United
States v. Paradise_, 480 U.S. 149, 166, n. 16 (1987) (plurality
opinion); _Adarand Constructors v. Pena_, 515 U.S. 200, 217 (1995).
Therefore, the Fifth Amendment forbids the federal government from:
(1) creating racial classifications that are not narrowly tailored to
serve a compelling government interest; and (2) creating gender
classifications that are not substantially related to the achievement
of important government objectives. See _Adarand_, 515 U.S. at 227;
see also _United States v. Virginia_, 518 U.S. 515, 533 (1996).

The Proposed Rule violates the equal protection component of the Fifth
Amendment’s Due Process Clause. “At the heart of the
Constitution’s guarantee of equal protection lies the simple command
that the Government must treat citizens as individuals, not as simply
components of a racial, religious, sexual or national class.”
_Miller v. Johnson_, 515 U.S. 900, 911 (1995) (quoting _Metro
Broadcasting v. FCC_, 497 U.S. 547, 602 (1990) (O’Connor, J.,
dissenting) (internal quotation marks omitted)). The Proposed Rule,
however, does just that. It would require:

Nasdaq-listed companies, subject to certain exceptions, (A) to have at
least one director who self-identifies as a female, and (B) to have at
least one director who self-identifies as Black or African American,
Hispanic or Latinx, Asian, Native American or Alaska Native, Native
Hawaiian or Pacific Islander, two or more races or ethnicities, or as
LGBTQ+, or (C) to explain why the company does not have at least two
directors on its board who self-identify in the categories listed
above[.]

Contrary to the fundamental guarantee of equal protection under the
law, the Proposed Rule’s requirement to have at least one director
who self-identifies as a specific race is a racial quota that, if
adopted as law, will violate the Fifth Amendment. All racial
classifications, both disadvantaging and benefitting minorities, are
subject to strict scrutiny. _Adarand_, 515 U.S. at 227. To survive
strict scrutiny, the government must demonstrate that the racial
classifications are narrowly tailored to further a compelling
government interest. Id. “Diversity” itself is not a compelling
interest. See _Grutter v. Bollinger_, 539 U.S. 306, 330 (2003); see
also Parents Involved in _Cmty. Sch. v. Seattle Sch. Dist. No. 1_, 551
U.S. 701, 729-731 (2007). Neither is “outright racial balancing,”
which the Supreme Court deems “patently unconstitutional.”
_Grutter_, 539 U.S. at 330.

What Nasdaq proposes is unlike any other racial classification
approved by the Supreme Court. Cf. _Grutter_, 539 U.S., at 316,
335-336 (holding constitutional an affirmative action program that
considered race as only one factor in achieving student body diversity
and did not seek any particular number or percentage of minority
students). Nasdaq justifies the Proposed Rule’s racial quota by
relying on studies that purportedly show that racial diversity on
boards discourages “groupthink” by increasing “cognitive
diversity.” But this justification “embod[ies] stereotypes that
treat individuals as the product of their race, evaluating their
thoughts and efforts—their very worth as citizens—according to a
criterion barred to the Government by history and the Constitution.”
_Miller v. Johnson_, 515 U.S. 900, 912 (1995). This numerical
set-aside amounts to just another form of unconstitutional racial
balancing. See Parents Involved in _Cmty. Sch_., 551 U.S. at 732
(“Racial balancing is not transformed from ‘patently
unconstitutional’ to a compelling state interest simply by
relabeling it ‘racial diversity.’”).

Moreover, employing racial classifications for the sake of
“cognitive diversity” and inclusion does not further a compelling
government interest. “[T]he interest in diversity of viewpoints
provides no legitimate, much less important, reason to employ race
classifications apart from generalizations impermissibly equating race
with thoughts and behavior.” _Metro Broadcasting_, 497 U.S. at 602
(O’Connor, J., dissenting) (emphasis in original); see also
_Lutheran Church-Missouri Synod v. FCC_, 141 F.3d 344, 355 (D.C. Cir.
1998) (citing approvingly J. O’Connor’s dissent in _Metro
Broadcasting_).

Additionally, “the [Supreme] Court has given every indication of
wanting to cut back _Metro Broadcasting_,” where it found that
diversity was only an “important” government interest. _Lutheran
Church-Missouri Synod_, 141 F.3d at 354-355. The Supreme Court
overruled _Metro Broadcasting_ to the extent that it was inconsistent
with its holding in _Adarand_ that racial classifications at all
government levels are subject to strict scrutiny review. 515 U.S. at
227. It is thus doubtful that the Supreme Court would now elevate
“diversity” from an important to a compelling government interest.
Moreover, a race-conscious program is not narrowly tailored if it uses
a quota system, like the one proposed by Nasdaq. See Grutter, 539 U.S.
at 334. Thus, this quota system will surely fail strict scrutiny
review. Simply put, the diversity interest advanced by Nasdaq is
insufficient under the law to justify the Proposed Rule’s racial
quotas.

Further, the Proposed Rule’s requirement to have at least one
director who self-identifies as a female is a gender quota that, like
the racial quota, if adopted as law, will violate the Fifth Amendment.
Gender classifications are constitutional only if the government can
demonstrate “exceedingly persuasive justification” for the
classification. _Virginia_, 518 U.S. at 531. To meet this burden, the
government must show that the classification is substantially related
to achieving an important governmental objective. _Id_. at 533.

Just like its justification for racial quotas, Nasdaq justifies the
gender quotas by relying on studies that purportedly show that gender
diversity on boards discourages “groupthink” by increasing
“cognitive diversity.” For a gender classification to be
constitutional, not only must the justification be “genuine, not
hypothesized,” but it also “must not rely on overbroad
generalizations about the different talents, capacities, or
preferences of males and females.” _Id. _Yet, Nasdaq’s
justification is, at its essence, exactly that – an assumption that
women think so differently than men that it can affect the output of a
board.

Moreover, the “comply-or-explain” framework does not save the Rule
from its constitutionally fatal flaws. Nasdaq portrays its Proposed
Rule as a choice rather than a mandate. However, this “choice” is
unduly coercive. As explained below, the government cannot encourage
or facilitate private discrimination. The Proposed Rule is designed to
do just that, with or without the option to explain non-compliance.
Although the Proposed Rule permits a listed company to explain in a
public statement why it has failed to meet the racial and gender
quotas, “the relevant question is not whether a [Rule] requires the
use of such measures, but whether it authorizes or encourages them.”
_Bras v. California Public Utilities Commission_, 59 F.3d 869, 875
(9th Cir. 1995). If adopted, the SEC would undoubtedly be authorizing
and encouraging Nasdaq-listed companies to use racial and gender
quotas.

This sort of government authorization and pressure to employ such
quotas violates the Fifth Amendment. That is precisely what the D.C.
Circuit Court of Appeals found in _MD/DC/DE Broadcasters Ass’n v.
FCC_, 236 F.3d 13, 18 (D.C. Cir. 2001). There, the court found that
although an FCC rule allowed broadcasters to select one of two options
for “broad outreach” in recruiting efforts, one of the options was
unconstitutional because “the rule [created] pressure to recruit
women and minorities, which pressure ultimately [could] not withstand
constitutional review.” Id. This “option,” the court explained,
was instead a “government _mandate_ for recruitment targeted at
minorities [and females]” that constituted a “racial [and gender]
classification” that subjects persons of different races to
‘unequal treatment.’”_ Id._ at 20 (emphasis added). This was
true even though the other option did not focus specifically on race
or gender. _Id._ at 18-20. Similarly, the Proposed Rule’s
“comply-or-explain” framework does not transform the Rule from
being unconstitutional to being constitutional.

II. THE PROPOSED RULE REQUIRES NASDAQ MEMBERS DISCRIMINATE.

The Proposed Rule, if adopted, will inevitably require listed
companies to discriminate on the basis of race and sex when selecting
board members, in violation of the Constitution: “A ‘law
compelling persons to discriminate against other persons because of
race’ is a ‘palpable violation of the [Fifth] Amendment,’
regardless of whether the persons required to discriminate would have
acted the same way regardless of the law.”_ Monterey Mech. Co. v.
Wilson_, 125 F.3d 702, 707 (9th Cir. 1997) (quoting _Peterson v. City
of Greenville_, 373 U.S. 244, 248 (1963)). This requirement to
discriminate puts skin color and gender ahead of merit.

As Warren Buffet explained in a letter to Berkshire Hathaway
shareholders, “At Berkshire, we are in the specialized activity of
running a business well, and therefore we seek business judgment.”
Requiring Nasdaq members to focus more on race and gender takes away
from the focus on merit. To put it bluntly, as Warren Buffet did when
discussing such requirements, the Proposed Rule “sounds as if the
mission is to stock Noah’s ark.” Under this Rule, the question
won’t be “Who has the best business judgment?” Instead, it will
be “What are the racial and gender checkboxes that we need to
fill?” The SEC should not be in the business of condoning and
mandating such discriminatory decision-making.

III. THE PROPOSED RULE AMOUNTS TO GOVERNMENT ACTION.

For an action to violate the Fifth Amendment, the government must act.
Discrimination on the basis of race or sex violates the Constitution
“only when it may be attributed to [government] action.” _Edmonson
v. Leesville Concrete Co._, 500 U.S. 614, 619, 111 S. Ct. 2077, 2082
(1991) (citation omitted). Here, the Rule would constitute government
action on the part of the SEC for purposes of establishing an equal
protection claim. See _Blount v. SEC_, 61 F.3d 938, 941 (D.C. Cir.
1995).

The Proposed Rule only takes effect if the SEC approves it. Under the
Securities Exchange Act, the SEC is a governmental body charged with
ensuring that every self-regulatory organization (“SRO”), such as
Nasdaq, complies with the provisions of the Act, the SEC’s own rules
and regulations, and the SRO’s own rules. See generally 15 U.S.C. §
78s. Nasdaq’s proposed rules cannot “take effect unless approved
by the Commission.”_ Id. _at §78s(b)(1). Once the SEC approves a
proposed rule, it, in effect, becomes binding federal law. The rule
then “may be enforced by such organization to the extent it is not
inconsistent with the provisions of [the Exchange Act], the rules and
regulations thereunder, and applicable Federal and State law.” _Id._
at § 78s(b)(3)(C).

As has been the case in other actions maintained against the SEC, a
court is likely to find that that the proposed rule, if adopted,
constitutes government action. In _Blount_, the D.C. Circuit Court of
Appeals rejected the argument of defendant-intervenor, a
self-regulatory organization, that a challenged rule was not the
product of government action. _Blount_, 61 F.3d at 941. And in New
York Republican State Comm. v. SEC, government action was not an issue
that barred the court from hearing a claim challenging the
constitutionality of FINRA’s proposed rule that was adopted by the
SEC. 927 F.3d 499, 503 (D.C. Cir. 2019).

Further, the SEC, as a federal governmental agency, is forbidden from
encouraging and facilitating discrimination on the basis of race and
sex. The U.S. Supreme Court has recognized that “the impetus for the
forbidden discrimination need not originate with the State if it is
state action that enforces privately originated discrimination.”
_Moose Lodge No. 107 v. Irvis_, 407 U.S. 163, 172 (1972) (citing
_Shelley v. Kraemer_, 334 U.S. 1 (1948). As the Court announced in
_Reitman v. Mulkey_, the government may not authorize or encourage
private discrimination. 387 U.S. 369, 375-76 (1967). In that case, the
Court found that an amendment to the California Constitution amounted
to government authorization of private discrimination in the housing
market. This was enough for the Court to find state action, such that
the government was encouraging and facilitating private discrimination
in violation of the Fourteenth Amendment. Id.

In short, if the SEC adopts the Proposed Rule, it will amount to
government action facilitating and encouraging private discrimination
on the basis of race and sex, in violation of the Fifth Amendment.
There is no doubt that litigation will commence shortly after the
Proposed Rule goes into effect.

The Proposed Rule is repugnant to the Constitution’s guarantee of
equal protection under the law. Because it runs afoul to the Fifth
Amendment, Judicial Watch urges the SEC to reject this flagrantly
unconstitutional Rule.

Sincerely,

Thomas J. Fitton

President, Judicial Watch, Inc.

To read the full comment letter with footnotes, click here
[[link removed]].


Until next week …





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