Tags: statute | limitation | prosecute | cases

Government Using 1948 Law to Prosecute Statute of Limitation Cases

Tuesday, 16 Apr 2013 01:17 PM

By Lisa Barron

The Department of Justice, under pressure from some in Congress to get tougher on financial crimes, is turning to obscure laws to buy itself more time to prosecute statute of limitation cases, according to The Wall Street Journal.

Prosecutors in Manhattan reportedly sued Wells Fargo & Co. in December for allegedly defrauding the Federal Housing Authority out of hundreds of millions of dollars by writing fake loans and then hiding them from government guarantors. By that time, however, the statue of limitations on much of the alleged wrongdoing had run out.

The government, though, argued that the limitations don’t apply because under the 1948 Wartime Suspension of Limitations Act prosecutors have unlimited time to pursue alleged fraud during times of war. And the U.S. is currently at war in Afghanistan.

Wells Fargo has denied the original charges and countered in a February legal brief that the allegations had “nothing to do with wartime contracting,” the context in which the 1948 law was enacted, according to the Journal.

This is not the first time the government has used such an argument. According to the Journal, it invoked the 1948 law 12 times between 2008 and 2012, as many as it had in the previous 47 years. The department began utilizing the old statute following passage of a 2008 congressional amendment extending the amount of time after the cessation of hostilities from three years to five years and added language specifying that the law didn’t require an actual declaration of war to be used.

Defense attorneys, however, claim government prosecutors are contorting the laws to serve purposes for which they were not intended. The Journal noted that lawyers for French bank BNP Paribas SA against charges of defrauding a farm futures guarantee program wrote in a February 2012 brief that if the court allowed the use of the wartime law, it “would lead to absurd results.”

If the government’s definition of “war time” were applied to other conflicts, “the conflict in Korea may be continuing as a war to this day,” the lawyers wrote in the brief.

A judge in Texas allowed the case to proceed in August, but not all of the government’s attempts to extend the statute of limitations have worked.

The Supreme Court in January reportedly rejected the Securities and Exchange Commission’s attempt to extend a five-year statute on securities violations; it sued a former money manager and an executive at Gabelli Funds six years after they allegedly took part in a market-timing scheme.

Although a lower court upheld the government’s case, the Supreme Court ruled against the SEC. In its unanimous opinion, the Journal reported, the court quoted former Chief Justice John Marshall, who said that eliminating the statute of limitations “would be utterly repugnant to the genius of our laws.”

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