By Joanne Cursinella, J.D.
The SEC’s Division of Enforcement no longer seeks disgorgement of approximately $45 million in “ill-gotten gains” from the respondents in their administrative proceeding, In the Matter of Lynn Tilton, et al., because of the Supreme Court’s recent holding in Kokesh v. SEC that disgorgement constitutes a penalty subject to a five-year limitations period.
The Commission originally charged Tilton and her firm in 2015 with defrauding her collateralized loan obligation investors. In connection with this proceeding, among other things, the Commission sought a disgorgement of $45,447,417. On June 5, 2017, however, the U.S. Supreme Court, in a unanimous decision, held that disgorgement is a penalty subject to a five-year limitations period.
The Division acknowledged that the alleged misconduct charged in Commission’s administrative proceeding took place more than five years before the proceeding was commenced. So, it has withdrawn its disgorgement request in this matter. In its June 9 letter, however, the Division also noted that the U.S. Supreme Court has not addressed the question of whether courts are empowered to order disgorgement in SEC enforcement cases and that Kokesh did not address the Eighth Amendment's Excessive Fines Clause.