Justices limit recovery in fraud cases

The Supreme Court on Monday made it tougher for the government to recover ill-gotten gains from people convicted of securities fraud, ruling that such recoveries are subject to a five-year statute of limitations.

The unanimous ruling could hamstring prosecutors trying to recoup huge sums of money in cases where alleged fraud has been going on for decades before authorities file charges.

The justices overturned a lower court decision that ordered venture capitalist Charles Kokesh to pay the Securities and Exchange Commission $35 million from investor funds he used to pay himself and others at his New Mexico-based operation from 1995 to 2006.

Lawyers for Kokesh had argued that the five-year window would reduce his payment to just $5 million because the SEC did not bring charges against him until 2009.

Justice Sonia Sotomayor said in her opinion that socalled “disgorgement” actions are the equivalent of penalties, which have long been considered subject to the five-year limit for collection.

An SEC spokesman declined to comment.

In another unanimous ruling Monday, the court said religious hospitals don’t have to comply with federal laws protecting pension plans in a case that affects retirement benefits for approximately a million workers nationwide.

The justices sided with three church-affiliated nonprofit hospital systems being sued for underfunding their employee pension plans.

The hospitals — two with Catholic affiliation and one with Lutheran ties — had argued that their pensions are “church plans” that are exempt from the law and have been treated as such for decades by federal officials.