The Joplin Globe, Joplin, MO


January 8, 2013

Supreme Court seems skeptical about government extension

WASHINGTON — The Supreme Court seemed skeptical Tuesday about government claims that it should be allowed more time to sue some fund executives for securities fraud.

The high court on Tuesday heard arguments from Gabelli Funds LLC executive Bruce Alpert and former executive Marc J. Gabelli, who say the Securities and Exchange Commission missed its chance to sue them for allegedly committing securities fraud by allowing a hedge fund to rapidly trade shares of a mutual fund.

Gabelli and Albert say a five-year statute of limitations started no later than 2002 when the action occurred. The SEC argued the clock didn’t start until it discovered the practice in late 2003, which put the 2008 lawsuit within the time limit.

The 2nd U.S. Circuit Court of Appeals agreed that the time limit starts with discovery of the practice.

But Gabelli and Albert’s lawyers noted that government officials had never asserted the ability to stretch out the statute of limitations before this case. “The position that the SEC is taking now is a novel position that to our knowledge has not been taken by other regulators and hasn’t been taken by the SEC until quite recently,” Lewis J. Liman said.

Several justices agreed. “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.

Justice Stephen Breyer noted any statute of limitation extension would affect more than just security cases. “It is a statute that applies to all government actions, which is a huge category across the board,” said Breyer, who said extending the time limit could affect government enforcement actions involving Social Security, Veteran’s Affairs and Medicare.

“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,” Breyer said.

And Justice Elena Kagan suggested that the only reason the government is trying to stretch back and go after Gabelli and Albert is because the New York attorney’s general office got there first.

“The government had decided not to go after market timers,” she said. “And it changed its decision when a state attorney general decided to do it, and it embarrassed them that they had made that enforcement priority decision, and then the government made a different enforcement priority decision.”

Justice Department lawyer Jeffrey B. Wall said he didn’t think that suggestion was fair.  He also said he couldn’t believe that lawmakers intended to create such an obvious loophole.

“I cannot imagine that the Congress, which allowed agencies to seek civil penalties ... would have thought that the only people who could get away without paying them are the ones who commit fraud or concealment and that remains hidden for five years,” Wall said.

A decision is expected by summer.


Text Only

A Missouri Senate committee has endorsed a 1-cent sales tax increase to fund transportation projects. The proposed constitutional amendment passed the House earlier this month. If passed by the full Senate, the measure would head to the November ballot for voter approval. Would you vote in favor of it?

     View Results
Twitter Updates
Follow us on twitter
NDN Video
Captain of Sunken SKorean Ferry Arrested Raw: Fire Destroys 3 N.J. Beachfront Homes Raw: Pope Presides Over Good Friday Mass Raw: Space X Launches to Space Station Superheroes Descend on Capitol Mall Man Charged in Kansas City Highway Shootings Obama Awards Navy Football Trophy Anti-semitic Leaflets Posted in Eastern Ukraine Raw: Magnitude-7.2 Earthquake Shakes Mexico City Ceremony at MIT Remembers One of Boston's Finest Raw: Students Hurt in Colo. School Bus Crash Raw: Church Tries for Record With Chalk Jesus Raw: Faithful Celebrate Good Friday Worldwide Deadly Avalanche Sweeps Slopes of Mount Everest Police Arrest Suspect in Highway Shootings Drought Concerns May Hurt Lake Tourism Vermont Goat Meat Gives Refugees Taste of Home Calif. Investigators Re-construct Fatal Bus Cras Mayor Rob Ford Launches Re-election Campaign Appellate Court Hears Okla. Gay Marriage Case