Court slaps away SEC’s regulatory hand; defends statute of limitations
The Supreme Court is considering a ruling involving securities fraud and the statute of limitations. The issue at hand is whether or not the timeframe for the five-year statute of limitations should start when the fraudulent act happened or when regulators first found out about the fraud.
The court listened to arguments from both sides, Gabelli Funds LLC and the Securities and Exchange Commission. Gabelli’s defense attorney argued that the SEC doesn’t have a right to sue their client because they are too late. They’ve missed the five-year window. SEC officials say that these crimes should not go unpunished simply because the perpetrators were able to remain hidden for five years, exhausting the statute of limitations.
The justices seemed to agree with the defense citing that ruling otherwise would have a ripple effect on all statute of limitation laws. Justice Breyer says, “It seems to me to have enormous consequences for the government suddenly to try to assert a quasi-criminal penalty and abolish the statute of limitations, I mean, in a vast set of cases,” explaining the significance if the court were to agree with the plaintiff.
“What’s extraordinary is that the government has never asserted this, except in the 19th century, when it was rebuffed and repudiated its position. It isn’t just that there are no cases against you. It’s you’ve never — the government has never asserted it before,” Justice Antonin Scalia said driving home the point that a government body has never been allowed to use the fraud discovery date as the basis for the five-year statute window.
When the court makes the final ruling on this matter later this year, the ruling will affect who can become targets of not just fraud cases but any case that has a statute of limitations. Limiting a timeframe during which a person can be sued or charged with a crime is meant to protect people from false accusations, accusations that due to the passing of time, might be harder to support or refute with evidence.
Source: The Associated Press, “Supreme Court seems skeptical about allowing government extension in time to sue,” Jan. 8, 2013