The U.S. Supreme Court ruled in an 8-1 decision on Monday that the U.S. Securities and Exchange Commission can confiscate money from companies that have obtained it via fraud.
According to The Hill, however, the court also put some restrictions on the federal agency’s ability to act on this power.
Justices heard a case involving Charles Liu, who was determined by a federal court to have fraudulently enticed investors into sending him $20 million, ostensibly to help fund cancer treatment centers.
“That remedy may have gone by different names”
In reality, evidence shows Liu kept some of the money for his personal use and sent the rest to other fraudulent operations. Following an order that required him and his wife to hand over the $8.2 million they had on hand, Liu challenged the decision.
His argument that the SEC exceeded its authority was rejected by an appeals court and the nation’s highest court backed up that decision this week. Justice Sonia Sotomayor wrote the majority opinion in the case.
She stressed, however, that authorities are not given unlimited power to exercise when it comes to recovering such fraudulently obtained funds.
“Equity courts have routinely deprived wrongdoers of their net profits from unlawful activity, even though that remedy may have gone by different names,” Sotomayor wrote.
In an analysis published on SCOTUS Blog, Columbia law professor Ronald Mann wrote that Sotomayor “flatly rejects the practice (followed by the lower court here ) of ordering disgorgement of all revenues.”
“Shotgun blasts into the face”
The justice “acknowledges the possibility that ‘personal services’ expenses should be disallowed as ‘inequitable’ in a case in which defendants operated an ‘entirely fraudulent scheme,'” Mann added.
Justice Clarence Thomas was the lone member of the court to dissent from the majority opinion, contending in his decision that the government has no right to any of the money that Liu obtained illegally.
The issue of Supreme Court appointments has been at the forefront in recent days as President Donald Trump reacted to a pair of decisions he described as “shotgun blasts into the face of people that are proud to call themselves Republicans or Conservatives.”
This case proves, however, that there are still some issues on which experts on both sides of the ideological spectrum can agree.