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Charles Kokesh, who won a unanimous U.S. Supreme Court ruling in June over whether there was a five-year statute of limitations in connection with his allegedly illegal activities, must still disgorge $5 million, a federal appeals court said on Monday.
However, that sum is significantly less than the $34.9 million Mr. Kokesh was originally told to pay.
The case of Securities and Exchange Commission v. Charles Kokesh has a long litigation history. The SEC had charged Mr. Kokesh with misappropriating funds from four business development companies in violation of federal securities laws from 1995 through 2006.
Following a jury trial, in 2014 the U.S. District Court in Las Cruces, New Mexico, ordered the disgorgement of $34.9 million plus prejudgment interest of $18.1 million and imposed a $2.4 million civil penalty.
In August 2016, the 10th U. S. Circuit Court of Appeals in Denver held the SEC was not subject to a five-year statute of limitations, and Mr. Kokesh appealed.
However, after a contradictory opinion was issued by another appeals court, the U.S. Supreme Court said in a unanimous 9-0 ruling in June 2017 in Mr. Kokesh’s case that the SEC’s disgorgement recovery method is subject to a five-year statute of limitations.
Monday’s ruling by the 10h Circuit focused on the issue of whether, in light of the Supreme Court’s ruling, Mr. Kokesh is obligated to pay $5 million in connection with activities that occurred with the five -year limitation period.
The statute-of-limitations issue in this case “turns on whether defendant’s misappropriation of funds … are properly viewed as a continuing violation or as a number of discrete wrongs,” said the ruling.
In ruling for the latter, the decision said: “To hold that Defendant’s misappropriations constituted only one continuing violation would do much more than provide repose for ancient misdeeds; it would confer immunity for ongoing misconduct …
“We cannot continence such a result, nor do we think that a proper interpretation of (the Supreme Court opinion) requires use to,” said the ruling, in remanding the case with instructions to require Mr. Kokesh to disgorge more than $5 million.
A case now before the U.S. Supreme Court will determine how long companies will have to worry about the U.S. Securities and Exchange Commission coming after them to recover funds that were deemed illegally obtained.