In the Courts

A federal jury previously found Kokesh guilty of misappropriating money from four business-development companies from 1995 through July 2007. Following the trial, Kokesh was ordered to pay a $2.4 million penalty and a $35 million disgorgement. Due to the five-year statute of limitations period imposed by Section 2462 of the U.S. Code, which applies to any “civil fine, penalty, or forfeiture,” the penalty only applied to misappropriations committed by Kokesh between 2005 and 2009, when the SEC brought suit. The disgorgement, however, took into account every misappropriation committed by Kokesh since 1995. Kokesh appealed, arguing that the disgorgement order disregarded the five-year statute of limitations.

In a June 2017 decision, the Supreme Court unanimously agreed with Kokesh, holding that the disgorgement constituted a penalty and was therefore subject to the statute of limitations. See, Kokesh v. SEC, No. 16-529. Writing for the Court, Justice Sonya Sotomayor reasoned that the disgorgement “bears all the hallmarks of a penalty: it is imposed as a consequence of violating a public law and it is intended to deter, not to compensate.” The SEC had argued that disgorgement was neither a penalty nor restitution. Justice Sotomayor disagreed, stating that “disgorgement does not restore the status quo; it leaves the defendant worse off.”