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Keywords

statuteappealleasestatute of limitations

Related Cases

S.E.C. v. Koenig, 557 F.3d 736, Fed. Sec. L. Rep. P 95,077

Facts

James Koenig, the CFO of Waste Management, engaged in fraudulent accounting practices to artificially inflate the company's profits from 1992 to 1996. These practices included netting and basketing, which misrepresented the company's financial health and misled investors. When the company later disclosed the inaccuracies, it resulted in a significant drop in stock value, leading to the SEC's civil action against Koenig.

James Koenig, the CFO of Waste Management, engaged in fraudulent accounting practices to artificially inflate the company's profits from 1992 to 1996.

Issue

Whether the SEC's claim for civil penalties against Koenig was timely under the statute of limitations and whether prejudgment interest could be included as part of the 'pecuniary gain' for penalty purposes.

Rule

The statute of limitations for civil penalties under federal law begins when the claim is discovered, not when the violation occurred. Additionally, prejudgment interest can be considered part of the 'pecuniary gain' when calculating penalties for securities law violations.

The statute of limitations for civil penalties under federal law begins when the claim is discovered, not when the violation occurred.

Analysis

The court determined that the SEC's claim was timely because the fraud was not discovered until October 1997, when Waste Management issued a press release about its unreliable financial statements. The court also found that prejudgment interest was a legitimate component of Koenig's 'pecuniary gain' since it represented the economic return he could have earned on the bonuses he received during the fraudulent period.

The court determined that the SEC's claim was timely because the fraud was not discovered until October 1997, when Waste Management issued a press release about its unreliable financial statements.

Conclusion

The Court of Appeals affirmed the district court's ruling, allowing the SEC to treat prejudgment interest as part of Koenig's 'pecuniary gain' and upholding the civil penalties imposed on him.

Who won?

Securities and Exchange Commission (SEC) prevailed as the court upheld the penalties and disgorgement order against Koenig.

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Keywords

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