The Supreme Court just gave scam artists a free pass
Attention all scam artists: The US Supreme Court has given you a way to ensure a comfortable retirement.
Everyone with a pension knows the term “vesting.” You work for a certain length of time, and then any money put into your retirement account is vested — guaranteed.
And nobody can ever take it away.
Well, thanks to a recent 9-0 ruling by the Supreme Court, people who steal money from others will be able to keep all of their ill-gotten gains if they haven’t been caught for five years.
Oddly, that’s about the same amount of time it takes to get a pension fully vested.
The high court ruling came in a civil case brought by the Securities & Exchange Commission against a guy named Charles Kokesh, a Santa Fe money manager and acquitted ivory poacher.
Stealing money from people is one thing, but I think we’d all say tusk, tusk, tusk to taking the ivory from elephants.
The Supremes were only dealing with the theft of money — $34.9 million, to be exact, that was taken mostly from small investors from 1995 to 2009.
The SEC got the judge in Kokesh’s original case to rule that the embezzler had to turn over the $34.9 million he stole, plus a $2.4 million fine. But the Supremes, with Justice Sonia Sotomayor on lead vocals, disagreed and said the SEC could only get Kokesh to give back — “disgorge” is the term for it — $5 million.
That $5 million represented the ill-gotten gains that Kokesh pocketed in the five years after the SEC filed the suit. The remaining $29.9 million was just as dirty but was ruled to be off limits from US regulators because it was swiped beyond the five-year statute of limitations on fraud penalties.
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The SEC could have taken this pile of cash if it did not call it a disgorgement — and instead turned it over to victims of the fraud.
But the court ruled the disgorgement was a penalty — so Kokesh gets to keep the cash. It’s as though it became vested after the SEC neglected to press its case in less than five years.
The Supremes unanimously agreed that the $29.9 million was really a penalty in different clothing and, therefore, protected by the five-year statute of limitations.
However, would-be fraudsters should probably think about this: The SEC, which only turns money over to those swindled when “it is feasible,” might start doing that more.
And folks at the SEC might just walk over to the Justice Department and ask that your case be tried criminally — where there are more liberal statutes of limitations.