U.S. Tenth Circuit - The FindLaw 10th Circuit Court of Appeals Opinion Summaries Blog

Investment Manager Owes $5 Million for Misappropriation

A former investment manager got a break on nearly $50 million in fines, but still has to disgorge more than $5 million for misappropriating investors' money.

A federal appeals court had upheld orders that Charles Kokesh pay $34.9 million, plus $18 million in interest and a $2.4 million penalty two years ago. It wasn't enough to recoup $85 million his investment firms lost, but he appealed anyway.

Catching the case on the rebound from the U.S. Supreme Court, the U.S. Tenth Circuit Court of Appeals has settled on $5 million. For the government in Securities and Exchange Commission v. Kokesh, it was literally too little, too late.

Too Little, Too Late

In 2016, the Tenth Circuit upheld a trial court order against Kokesh for about $55 million in fines and penalties. But the U.S. Supreme Court reversed and remanded because of the statute of limitations in the case.

On remand, the SEC said Kekosh converted $5 million within the five-year statute. The defense argued that the misappropriation started more than five years ago.

Judge Harris Hartz, writing for the appeals panel, said it occurred in a series of individual acts.

"[T]he misappropriations constituted 'a series of repeated violations of an identical nature,'... with each unlawful taking being actionable for five years after its occurrence," he said.

Repeated Misconduct

The Tenth Circuit said it would "confer immunity for repeated misconduct" to allow a defendant to get away with "ancient misdeeds" over time.

"Defendant could take $100 a year for five years and then misappropriate tens of thousands without fear of liability," the court said.

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