Hidden 'Time' Bombs in White-Collar Criminal Matters

Similar examples abound, including a six-year statute of limitations and special tolling provisions for certain tax crimes, as well as provisions permitting the government to suspend applicable statutes of limitations while it seeks to gather foreign evidence or investigate frauds committed during times of war. On occasion, the Supreme Court has pushed back against expanding limitations periods, including in criminal conspiracy cases and in two recent enforcement cases brought by the Securities and Exchange Commission (SEC). Nevertheless, Congress has armed the government with an arsenal of weapons to extend limitations periods in white collar cases, which prosecutors have used in increasingly creative ways that are often difficult for defendants to predict.

MLATs: A Hidden Three-Year Extension for Cross-Border Financial Crimes

In 1984, Congress empowered federal prosecutors to seek suspension of the applicable statute of limitations for up to three years while seeking to obtain business records and other evidence located overseas. See, 18 U.S.C. §3292. Section 3292 was a response to the increasing use of offshore banks in money laundering and tax evasion cases, which created delays for prosecutors seeking records from other countries and resulted in statute-of-limitations problems. Section 3292 allows the government to file an ex parte application asking a court to toll the applicable statute of limitations while awaiting production of evidence located overseas pursuant to a mutual legal assistance treaty (MLAT).

The Department of State has entered into dozens of MLATs with countries across the globe. Because many of today's business transactions have an international component, Section 3292 has played an increasingly important role in white collar criminal matters. Savvy prosecutors can (and frequently do) wait until the five-year limitations period is nearly expired to make a Section 3292 application, effectively lengthening the statute of limitations to eight years. See, Robert Anello, Prosecutions from the Financial Crisis: When Is It Safe to Come out of the Woods?, Forbes.com (Sept. 28, 2016). Because the government may file Section 3292 requests ex parte, putative criminal defendants often are not aware that the limitations period has been tolled and that they still are subject to prosecution for conduct seemingly beyond the normal statute of limitations.

Most courts have held that, as long as the government files an ex parte Section 3292 motion to suspend a statute of limitations in a district court before the applicable statute of limitations expires, the limitations period is tolled until the foreign evidence is produced or for a three-year period, whichever comes first. See, e.g., United States v. Kozeny, 541 F.3d 166, 168 (2d Cir. 2008) (holding that Section 3292 “require[s] the government to apply for a suspension of the running of the statute of limitations before the limitations period expires”). Some courts have taken a more liberal approach and have concluded that the statute of limitations is tolled under Section 3292 from the date the government makes an official MLAT request to a foreign authority, even if the suspension application is filed after the limitations period has elapsed. See, e.g., United States v. Jenkins, 633 F.3d 788, 799 (9th Cir. 2011). At any rate, MLAT requests provide the government with a powerful tool to extend or “revive” applicable statutes of limitations. As the ongoing prosecution of a former FX trader in California (discussed next month in Part Two of this article) makes clear, however, the issue of the government's good faith use of MLATs may still provide defendants a basis to challenge the tolling when prosecutors' use of the MLAT is merely a pretextual means of lengthening their investigation period.

Next month, in Part Two of this article, we will discuss other means the government has at its disposal to extend the statute of limitations for prosecuting certain cases.

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Robert J. Anello, a member if the Board of Editors of Business Crimes Bulletin, is a partner in Morvillo Abramowitz Grand Iason & Anello PC. Justin Roller is an associate in the firm.