Keywords: Second Circuit, statute of limitations, criminal conspiracy, interest payments, interest rates, bidding process
On December 9, 2013, the US Court of Appeals for the Second Circuit significantly expanded the protections of the statute of limitations in criminal matters by holding that transactions such as interest payments that are tainted by conspiracy are insufficient to extent the statute of limitations. In United States v. Grimm, the court overturned the convictions of three executives accused of conspiracies related to the funding of municipal bonds because the government did not bring charges against the defendants during the statute of limitations period.
In Grimm, the three executives were accused of conspiring to keep down the interest rates paid to municipalities for certain types of municipal bonds. According to the government, between August 1999 and May 2004, the defendants agreed to pay kick-backs to certain providers in exchange for the providers rigging the bidding process related to setting interest rates on municipal bonds. The only wrongdoing alleged after July 24, 2004, was the periodic interest payments made to the municipal bond issuers. In some cases, these scheduled interest payments would continue for decades.
A federal grand jury did not indict the defendants until July 27, 2010, charging them with 10 separate conspiracies. After a three-week trial, the defendants were convicted.
The Second Circuit reversed. To establish a conspiracy, overt acts in furtherance of the conspiracy are required. The court found that "serial payments ... do not constitute overt acts" when they are "lengthy, indefinite, ordinary, typically noncriminal and unilateral." The court rejected the logic of the government's argument that "a conspiracy continues so long as a stream of anticipated payments contains an element of profit." The court held that this argument "... proves too much. A conspiracy to corrupt the rent payable on a 99-year ground lease would, under the government's theory, prolong the overt acts until long after any conspirator or co-conspirator was left to profit, or to plot."
The Second Circuit's decision has important implications for companies accused of antitrust violations. Plaintiffs often seek to bring actions long after the alleged conduct ceased and the passage of time makes those cases difficult to disprove. By requiring actual conduct, and not mere continuation of allegedly tainted transactions, the Second Circuit has given the statute of limitations real teeth.
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