332 F. Supp. 3d 575
E.D.N.Y.2018Background
- The SEC sued former Och‑Ziff employees Michael Cohen and Vanja Baros alleging a multi‑year scheme (2007–2012) to pay bribes to African public officials, plus related books‑and‑records and internal‑controls violations and Advisers Act fraud.
- The amended complaint describes nine transactions (Libya, Chad, Niger, DRC, Guinea, Congo‑Brazzaville, London transactions) in which intermediaries (Agents 1–3, South African associates) allegedly funneled Och‑Ziff funds to public officials and insiders.
- The SEC seeks disgorgement, civil penalties, and an injunction (including an "obey‑the‑law" injunction); no private plaintiffs were brought and many alleged harms are framed as wrongs to the public.
- Defendants moved to dismiss under Rule 12(b)(6), principally arguing the claims are time‑barred under 28 U.S.C. § 2462; Baros also raised personal‑jurisdiction and FCPA pleading issues.
- The court accepted the complaint’s factual allegations for the motion to dismiss but held that, after Kokesh, SEC monetary remedies (disgorgement and penalties) and the requested injunction are subject to § 2462’s five‑year limitation and that the alleged conduct accrued more than five years before suit.
- The court dismissed the amended complaint with prejudice because tolling agreements covered only Libya‑related claims and the SEC did not plausibly allege timely accrual or that defendants received ill‑gotten gains within the limitations period.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether SEC monetary relief (disgorgement/penalties) is time‑barred under 28 U.S.C. § 2462 | SEC argued § 2462 applies to remedies and remedy availability should await later stages; also invoked tolling agreements and sought discovery on post‑misconduct ill‑gotten gains | Defendants argued § 2462 applies and claims accrued when the alleged misconduct occurred; tolling agreements limited to Libya matters; no plausible allegation defendants received ill‑gotten gains within limitations | Held: Claims for disgorgement and penalties are time‑barred; tolling agreements only covered Libya investigations and SEC failed to plead timely accrual or receipt of ill‑gotten gains. |
| Whether the court may decide a § 2462 defense on a motion to dismiss | SEC urged deferral, contending remedy questions are premature and discovery may show timely accrual | Defendants moved to dismiss, arguing the complaint on its face shows § 2462 bar and discovery cannot evade limitations | Held: Court may resolve § 2462 on Rule 12(b)(6) where complaint shows claims are untimely; denying discovery to salvage untimely claims. |
| Whether an "obey‑the‑law" injunction is subject to § 2462 (i.e., is it a penalty?) | SEC argued injunctions are equitable/forward‑looking and not "penalties" under § 2462 and thus not time‑barred | Defendants argued such injunctions can be punitive/deterrent and thus fall under § 2462 after Kokesh | Held: The requested injunction would function at least partly as a penalty (public wrong, stigmatizing/deterrent effect) and is subject to § 2462; injunctive relief is time‑barred. |
| Whether tolling agreements tolled limitations for all SEC claims | SEC contended the LIA tolling agreements encompassed the broader Africa investigation and thus tolled claims based on later transactions | Cohen (and court) said the agreements expressly tolled claims "arising out of" the LIA investigation and did not extend to separate Och‑Ziff investigation or unrelated transactions | Held: Tolling agreements only covered claims arising from the LIA investigation (Libya transactions); other claims remained untimely. |
Key Cases Cited
- Kokesh v. SEC, 137 S. Ct. 1635 (2017) (SEC disgorgement is a penalty subject to § 2462)
- Gabelli v. SEC, 568 U.S. 442 (2013) (a claim accrues for § 2462 when the misconduct occurs)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard: plausible on its face)
- Chambers v. Time Warner, Inc., 282 F.3d 147 (2d Cir. 2002) (materials integral to the complaint may be considered on motion to dismiss)
- SEC v. Graham, 823 F.3d 1357 (11th Cir. 2016) (injunctive/declaratory relief and disgorgement analyzed under § 2462)
- SEC v. Collyard, 861 F.3d 760 (8th Cir. 2017) (discussion of whether injunctions are § 2462 penalties)