Does the Government Have a Perpetual Statute of Limitations?

October 02, 2012

The United States Supreme Court has just granted a writ of certiorari to decide whether the Securities and Exchange Commission (the SEC) has, in essence, a perpetual statute of limitations in cases arising out of alleged fraud. In Gabelli v. Securities and Exchange Commission, 11-1274 (cert. granted, Sept. 25, 2012), the Supreme Court will review whether 28 U.S.C. § 2462, the applicable statute of limitations, requires federal agencies to bring penalty actions “sounding in fraud” within five years of the date on which a violation occurred or the date on which the government discovered (or in the exercise of reasonable diligence should have discovered) the violation. The Court’s interpretation of Section 2462 is of great importance because this statute applies to the entire federal government in all civil penalty claims (except where Congress has specifically provided otherwise). If the Court rules in favor of the SEC, the government could delay indefinitely the filing of claims for civil penalties sounding in fraud by simply alleging that it had not discovered the basis for its claim until some time within the five-year limitations period.

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