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President Trump’s updated executive order used the Bowling Green terrorists as a justification for his policy changes even though they weren’t planning a domestic terrorist attack. His order states that “in January 2013, two Iraqi nationals admitted to the United States as refugees in 2009 were sentenced to 40 years and to life in prison, respectively, for multiple terrorism-related offenses.” Those two Iraqi nationals were Mohanad Shareef Hammadi and Waad Ramadan Alwan and they were each convicted of multiple terrorism offenses—but they were not convicted or even charged with attempting to carry out a terror attack on U.S. soil despite some erroneous media reports to the contrary. 

Hammadi and Alwan were arrested in an FBI sting operation. Hammadi pled guilty to a 12-count indictment on multiple charges of providing material support to foreign terrorists, material support for a designated terrorist organization, exporting a missile system that could destroy aircraft, and fraudulently procuring a U.S. passport. Alwan pled guilty to a 23-count indictment that included engaging in terrorism against Americans overseas, teaching someone how to make a bomb, providing material support to foreign terrorists, material support for a designated terrorist organization, and exporting a missile system that could destroy aircraft. The FBI rendered all of the weapons inert before allowing Hammadi and Alwan to handle them so nobody was ever in any real danger.

Alwan did show a confidential informant how to build bombs but, according to the Department of Justice, those lessons were provided “with the intent that they be used to train others in the construction and use of such IEDs for the purpose of killing U.S. nationals overseas, including officers and employees of the United States.” The press release that announces Hammadi’s guilty plea doesn’t mention any support for domestic terrorist attacks. Additional court documents show neither Alwan nor Hammadi was charged or convicted of planning a domestic terror attack.

Upon their indictment, David J. Hale, U.S. Attorney for the Western District of Kentucky said, “Whether they seek shelter in a major metropolitan area or in a smaller city in Kentucky, those who would attempt to harm or kill Americans abroad will face a determined and prepared law enforcement effort dedicated to the investigations and prosecutions necessary to bring them to justice.”

Upon their sentencing in 2013, Assistant Attorney General Monaco said, “These two former Iraqi insurgents participated in terrorist activities overseas and attempted to continue providing material support to terrorists while they lived here in the United States. With today’s sentences, both men are being held accountable.” 

Neither of those statements by U.S. attorneys, the numerous press releases I linked to above, nor the court documents show that Alwan or Hammadi was convicted or charged with planning a domestic terrorist attack. The sting operation was designed to show the two terrorists shipping weapons and money abroad to support insurgent operations against American forces in Iraq, not against Americans on U.S. soil. Alwan and Hammadi thought they were providing material and money for insurgents to kill Americans abroad—a serious crime but not one targeting Americans on U.S. soil. The overarching purpose of Trump’s new executive order is to protect the “nation from terrorist activities by foreign nationals admitted to the United States.” The convictions of Alwan and Hammadi do not support the supposed overarching purpose of Trump’s executive order.  

I’ve already explained, in a post over at Just Security, some of the law and background surrounding what we know about Donald Trump’s incendiary claim that his predecessor wiretapped his phones at Trump Tower during the presidential campaign, and I’d suggest reading that if you want to delve into some of the wonky details, but I thought it might be worth a separate point to pull out some of the critical points and remark on how the story has evolved since Saturday.

  • There’s no basis on the public record to support the allegation that phones at Trump Tower were wiretapped, or that the Trump campaign was targeted for electronic surveillance, let alone on the orders of Barack Obama. Former Director of National Intelligence James Clapper has publicly denied it, and FBI Director James Comey has reportedly been pressing for a disavowal from the Justice Department. This appears to be something Trump concocted on the basis of (deep breath now) his own misreading of a misleading Breitbart News article based on a talk radio host’s summary of months-old reports in the British press. Those news stories—which conspicuously haven’t been reported out by the deeply-sourced intelligence journalists at U.S. outlets, and so should be taken with a grain of salt—concern some sort of order, purportedly sought by the FBI from the Foreign Intelligence Surveillance Court, targeting Russian banks in order to follow up intelligence leads concerning possible transfers of funds from Russia to Trump aides. If the reports are true, that’s vastly different from what Trump alleged, and not obviously improper on its face, though when intelligence surveillance intersects domestic politics, even indirectly, there’s always an elevated risk of abuse.
  • The White House has been dodging and weaving a bit in its public statements following Trump’s allegations on Twitter. Initially, aides told multiple reporters that they thought the president had been reacting to the Breitbart piece, which was circulated internally on Friday. But, as I explain in more detail in my Just Security post, the sources drawn on for the Breitbart piece don’t actually support Trump’s claims. More recently, spokeswoman Kellyanne Conway insinuated that Trump may have some other classified basis for his accusations. She’s called on the FBI to release more information, while other White House officials have suggested it should fall to Congress to investigate. This is all, to put it mildly, grossly irresponsible. If the president has classified information about improper surveillance of his campaign, he is empowered to declassify it. If he’s not sure whether to believe what he reads on the Internet, the head of the executive branch is not limited to relying on Breitbart News to learn about the activities of his own intelligence community. But it should be wholly unacceptable for Trump to level serious accusations of criminal abuse of intelligence authorities by his predecessor,  then punt to Congress when pressed to produce evidence.  
  • The fact that Trump is apparently unshakable in his conviction on this point, with one spokesman indicating that he doesn’t believe Comey’s denial, is one more data point confirming that the relationship between the White House and the intelligence community had become untenably dysfunctional.  At the most recent Cato Surveillance Conference, a panel of former senior intelligence professionals voiced concern that Trump might be unwilling to accept intelligence that conflicted with his preconceptions. Some skepticism of the intelligence community is, to be sure, both healthy and justified, but if the president is more inclined to trust thinly-sourced conspiracy theories on talk radio than his own FBI director, that seems to quite starkly validate the panelists’ concerns. Signaling that intelligence output is going to be disregarded whenever the facts aren’t to the president’s liking is how you get politicized intelligence, which is detrimental to national security and, in the worst case, can lead to outcomes like foreign wars over nonexistent Weapons of Mass Destruction.
  • Notwithstanding all that, it could not hurt for Congress to kick the tires a bit and ask to be briefed on what intelligence tools have been employed in the course of the Russia inquiry, to what extent they may have ensnared either the communications or other records pertaining to Trump associates, and how widely any such information was subsequently disseminated. Not, again, because there’s any reason to credit Trump’s dramatic claims, but because the crossroads where foreign intelligence meets domestic politics is inherently a high-risk territory. Our history is, alas, replete with instances of information gleaned from foreign intelligence surveillance—often pursuant to investigations that were, in their inception, perfectly legitimate—later being improperly used to advance a political agenda. Quite apart from Trump’s most recent allegations, news headlines over the past month have been dominated by intelligence leaks that create the appearance of a war between the administration and elements of the intelligence community, which as I’ve written previously, is unlikely to end well for American democracy whichever side comes out on top.  
  • To the extent all this has awakened some members of Congress to the potential for abuse inherent in so-called “incidental” collection of Americans’ communications and other information as a byproduct of foreign-targeted surveillance, one hopes that newfound awareness outlives this news cycle. Many of the same officials now incensed by leaks harmful to the Trump administration have pooh-pooed concerns about the scale of collection on U.S. citizens under §702 of the FISA Amendments Act of 2008, which must be reauthorized—and ought to be reformed—by the end of the year. Several pundits have made the Obama administration’s loosening of the rules for sharing raw intelligence collected by the NSA pursuant to Executive Order 12333 part of their narrative about a “soft coup” against Trump by the “Deep State.” Surely they should be even more worried about the fact that the FBI can query NSA’s vast databases of §702 intercepts for the communications of Americans, exempt even from the statutory requirement (which does apply to CIA and NSA) to count and report on how often such “backdoor searches” occur. If such easy access to intercepts presents an unacceptable risk of political abuse, surely the solution is not simply to purge the current intelligence bureaucracy and stuff it with more devout loyalists, but to change the rules that make it possible. 

I’ll have more, no doubt, as this strange story continues to play out.

The reason for President Trump’s reissued executive order is to “protect the Nation from terrorist activities by foreign nationals admitted to the United States.” A further justification buried in the executive order is that “[s]ince 2001, hundreds of persons born abroad have been convicted of terrorism-related crimes in the United States.” 

What exactly is a “terrorism-related crime”? There is no definition in U.S. statutes. The phrase “terrorism-related” does appear but mostly in reference to actions of government officials in response to terrorism such as a terrorism-related travel advisory. One use of the phrase “terrorism-related” that makes the most sense in this context comes from the anti-terrorism Information Sharing Environment (ISE) that integrates information which the GAO defined as relating to “terrorism, homeland security, and law enforcement, as well as other information.” That’s so broad that a reasonable person can’t possibly see “terrorism-related” as synonymous with “terrorism.”

If the people counted as “terrorism-related” convictions were really convicted of planning, attempting, or carrying out a terrorist attack on U.S. soil then supporters of Trump’s executive order would call them “terrorism convictions” and exclude the “related.” After all, when people are convicted of murder we don’t call it a “murder-related conviction.” We call it murder.

The most famous list of terrorism-related convictions is that published by Senator Sessions in 2016 that shows 580 convictions from 9/11 until the end of 2014 (the link isn’t working now for some reason). Sessions’ list appears to be the source of the worry that “hundreds of person born abroad have been convicted of terrorism-related crimes in the United States.”   

Only 339 of the 580 terrorism-related convictions on Sessions’ list were actually convicted of a terrorism crime. The other 241 (42 percent) were not convicted of a terrorism crime. “Terrorism-related” apparently includes investigations that begin due to a terrorism tip but then ended in non-terrorism convictions. My favorite examples of this are the convictions of Nasser Abuali, Hussein Abuali, and Rabi Ahmed. An informant told the FBI that the trio tried to purchase a rocket-propelled grenade launcher but the FBI found no evidence of that. The three individuals were instead convicted of the non-terrorist crime of receiving two truckloads of stolen cereal—which is not terrorism.

An additional 92 (16 percent) convictions were of U.S.-born citizens whose plots would not have been prevented by Trump’s executive order. 

That leaves 247 (43 percent) who were foreign-born and actually convicted of a real terrorist offense. Of those, 180 were convicted of material support for foreign terrorists, attempting to join foreign terrorist organizations, planning a terrorist attack abroad, or a similar offense taking place abroad. Twenty-seven were extradited to the United States and tried here for any one of the offenses listed abroad. Only 40 were convicted of planning, attempting, or carrying out a terrorist attack on U.S. soil. Future immigrants and non-immigrants who are similar to those 40 terrorists are the intended focus of Trump’s executive order.  They only comprise 6.9 percent of the 580 “terrorism-related” convictions listed by Senator Sessions.

At most, only 58 percent of the “terrorism-related” convictions given as the likely justification for this executive order can be classified as actual terrorism. The other 42 percent were not convicted of a terrorism offense. Only 6.9 percent were convicted or attempting, planning, or carrying out a terrorist attack on U.S. soil.

As a note, Stanford University associate professor of law Shirin Sinnar recently received an answer to a FOIA that showed 627 convictions to the end of 2015 but I have not been able to parse them by terrorism or non-terrorism convictions.    

If this new executive order had been what was was signed initially—combined with the normal interagency process and briefing of border officials as to how to implement it—President Trump wouldn’t have provoked the type of political response he did or the legal quagmire he entered. This order is much more narrowly tailored, providing exemptions not just to those with green cards and other valid visas, but also people with significant contacts to United States, students, children, urgent medical cases, and other special circumstances—and Iraq is necessarily treated as a special case—as well as spelling out reasons for the remaining restrictions.

As it stands now, the tweaks in the new executive order would normally put these actions firmly within the executive’s authority under the relevant immigration laws: presidents have broad discretion over refugee programs and to suspend entry of certain classes of foreigners on national security grounds. But, in large part due to the botched development and implementation of the previous order, this isn’t the normal case and courts will likely be less deferential to assertions of executive power here than they would otherwise be.

And then there are the atmospherics of what so many people consider to be a “Muslim ban.” Just because a presidential candidate uses hyperbolic language during a campaign—or his surrogates use similarly inartful language on national TV—doesn’t mean that any policy in that area is constitutionally suspect, but some judges will surely see it that way.

Finally, all that’s before getting into the wisdom of this policy. Refugees generally aren’t a security threat, for example, and it’s unclear whether vetting or visa-issuing procedures in the six remaining targeted countries represent the biggest weakness in our border defenses or ability to prevent terrorism on American soil.

After a long battle with cancer, Ambassador Clayton Yeutter passed away on Saturday at the age of 86 at his home in Potomac, Maryland. With his passing, the world parts not only with a brilliant, effective, accomplished leader, but an extraordinarily generous, decent man whose enduring kindness and humble demeanor made politics and policymaking in Washington more tolerable for all involved.

Clayton Yeutter had a long an illustrious career spent in both the private and public sectors, as well as in academia, but he is probably best known for his service during the Ronald Reagan and George H.W. Bush administrations.

As Reagan’s U.S. Trade Representative from 1985 to 1989, Ambassador Yeutter presided over implementation of the very first U.S. bilateral free trade agreement (with Israel) and he launched and oversaw negotiation of the U.S.-Canada Free Trade Agreement, which evolved into the North American Free Trade Agreement, to include Mexico, in 1994.

As USTR, Ambassador Yeutter also launched and advanced the “Uruguay Round” of multilateral trade negotiations in 1986, under the auspices of the General Agreement on Tariffs and Trade, which resulted in broader and deeper reductions in global barriers to trade than had previously been achieved, and it established the World Trade Organization in 1995.

During the first two years of the George H.W. Bush administration (1989-91), Yeutter served as Secretary of Agriculture, where he was instrumental in steering U.S. agricultural policy back to a more market orientation, from which it had deviated in the mid-1980s. The 1990 farm bill (The Food, Agriculture, Conservation, and Trade Act of 1990) included reductions in agricultural subsidies that were negotiated during the Uruguay Round.

Yeutter held other high-profile positions, including an eight-year stint as President and CEO of the Chicago Mercantile Exchange—a period during which the volume of trade in agricultural, currency, and interest rate futures more than tripled. He served as Republican National Committee Chairman for two years, following the death of Lee Atwater.

In recent years, Yeutter was a partner at the law firm of Hogan and Hartson and then a senior adviser at the firm, after it merged to become Hogan Lovells.

My colleagues and I benefitted from Clayton’s knowledge, experience, and insights, as he served in an advisory capacity to the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies. Over the years, Clayton was always generous with his time. He read everything we published in the Cato trade center, frequently offering kind words of endorsement or gentle points of dissent.

Even as he was enduring wrenching and sometimes debilitating treatment for cancer, Ambassador Yeutter graciously participated in numerous trade policy events at Cato, speaking with his signature booming voice, offering encouragement to continue the fight for free trade, and holding court with his throngs of admirers in the policy world and in the media.

Last year, we held a conference to showcase the results of our comprehensive study on the Trans-Pacific Partnership and the then-85 year old’s still razor-sharp analytical and communications skills were on full display (starting at the 10 minute mark of the 3rd session).

Clayton Yeutter was born at the outset of the Great Depression in Nebraska’s worsening dustbowl, where he grew up, was educated, and met his first wife. Yeutter received a B.S., a J.D. and a Ph.D. in Agricultural Economics from the University of Nebraska–Lincoln. During the Korean War, between undergraduate and graduate studies, Yeutter served in the U.S. Air Force.

Clayton has innumerable professional pursuits and accomplishments to his name. He operated a 2,500 acre farming enterprise in Nebraska for 18 years; he taught agricultural economics and agricultural law at the University of Nebraska; he served as Chief of Staff to the Governor of Nebraska; he directed the University of Nebraska’s mission in Colombia, which was at the time the largest agricultural technical assistance program in the world; he held various positions within the U.S. Department of Agriculture during the Nixon and Ford administrations, including as Assistant Secretary of Agriculture for International Affairs and Commodity Programs and Deputy Special Trade Representative in the USTR’s office; he was a senior partner in the Nebraska-based law firm of Nelson, Harding, Yeutter & Leonard; he served on numerous corporate boards, including those of ConAgra Foods, Caterpillar Inc, and Texas Instruments.

After graduating from the University of Nebraska, in 1952, Yeutter married his first wife, Jeanne Vierk, with whom he had four children. Two years after Jeanne’s death, Yeutter married Cristena Bach with whom he adopted and raised three daughters.

Clayton was not only a hard-working, brilliant, accomplished man, but a genuinely decent, caring, and honest person of integrity, who was always willing to share his time and opinions on matters far and wide.

I liked and respected him deeply, and will always remember his generosity and the wisdom of his advice. Clayton was a rare breed in Washington, who exemplified decency and, through his demeanor and actions, reminded us that politics and the policy debate can be conducted without the vitriol and mean-spiritedness that has become all too common.

In 2015, the Clayton K. Yeutter Institute of International Trade and Finance was established at the University of Nebraska-Lincoln to help prepare students for the promise and pitfalls of an increasingly interconnected global economy. It’s hard to avoid the symbolism of the passing of a man of great integrity and humility, who believed with all of his fiber in the importance of international trade, investment, and cultural openness, at a time when that worldview and those values are under assault, especially in the United States.

Yeutter is survived by his wife, seven children, nine grandchildren, and one great-granddaughter. A memorial service will be held at 2 p.m. on April 8 at The Fourth Presbyterian Church, 5500 River Road, Bethesda, Maryland. Contributions may be directed to the University of Nebraska Foundation for the support of the Clayton Yeutter Institute of International Trade and Finance.

President Trump today issued a revised version of his infamous executive order to temporarily ban the issuance of new green cards and visas for nationals from Iran, Syria, Yemen, Libya, Somalia, and Sudan. The new order dropped Iraq, which eviscerated Trump’s argument that the list of banned countries is based on an existing list in U.S. law. The order also cuts the number of refugee admissions by about 37 percent compared to the post-1975 average number of annual refugees admitted—from 79,329 per year to just 50,000. However, there were 110,000 refugees scheduled to be admitted in 2017 so the actual decrease in refugees this year is a whopping 55 percent under this executive order. The Trump administration thinks this new order addresses many of the legal challenges made against the first version.

Introduction

When the first version of this order was signed at the end of January, Cato’s research showed that the actual domestic terrorism risk from nationals of those six countries was minor and that the order stands on shaky legal ground. For this iteration of the executive order, I intend to show that the permanent decrease in refugees costs native-born Americans more than we’d save from fewer terrorism deaths. This cost-benefit analysis does not look at the cost of temporarily reducing green cards and other visas.

Results

If Trump’s refugee reduction eliminated all deaths from refugee terrorists then it will cost native-born Americans about $159.4 million per life saved, which is about 10.6 times as great as the $15,000,000 per statistical life estimates if the average number of refugee admissions had stayed at 79,329 going forward (Figure 1). In other words, such a policy would reduce your annual chance of dying a terrorist attack committed by a refugee on U.S. soil from one in 3.64 billion per year to zero at a cost of $159.4 million per life saved. 

However, President Trump’s executive order is not decreasing refugee flows by 37 percent in 2017. The Obama administration slotted 110,000 refugee admissions for 2017, so this year’s reduction is actually 55 percent. If I assume that the new 110,000 annual admission figures would have been the new normal in the absence of Trump’s executive order, the economic costs increase to $326 million per life saved for a 100 percent reduction in your chance of dying in a refugee terrorist attack on U.S. soil. The economic costs incurred are about 21.7 times as great as the cost for a single death by refugee terrorist in this scenario (Figure 1). 

Figure 1

 

Average Number of Refugees Would Have Continued

Obama’s Boosted Number of Refugees Would Have Continued

New Chance of Being Killed in Refugee Terror Attack on U.S. Soil

100% Reduction in Refugee Terrorism

$159,356,197

$326,004,018

Zero

To break even, Trump’s decrease in the refugee program would have to save one life per year if the average number of 79,329 refugee admissions had continued or about two lives per year if President Obama’s boosted refugee numbers are considered the new baseline. Regardless, there would have to be an unrealistically large and sustained increase in deaths committed by refugee terrorists in attacks on U.S. soil to justify this reduction in numbers.

Methods

The above cost-benefit analysis is similar to that which Greg Ip at The Wall Street Journal published but with some minor changes.

I estimate the economic benefits of refugees to American natives. This figure is known as the immigration surplus which ignores all of the economic benefits to the immigrants themselves and instead focuses entirely on the economic benefit to native-born Americans. George Borjas estimates the immigration surplus at 0.24 percent of America’s $17.194 trillion GDP. Over 43 million immigrants are currently living in the United States. From 1975 to the end of 2015, about 3.3 million entered as refugees. I assume that 1/3 of those refugees are deceased. From this, I am able to make a rough estimate of the annual immigration surplus per refugee that I further decrease by 50 percent because refugees tend to be poor (although this doesn’t matter as much for the immigration surplus). The result is that each refugee increases the wages of native-born Americans by $476.61. I then multiply that lost immigration surplus per year by the number of fewer refugees admitted. I then take the chance of dying annually in a refugee terrorist attack and divide it by the current U.S. population to estimate how frequently a death would occur if the chance remains constant which estimates a death by a refugee terrorist once ever 11.4 years. Multiplying the wage loss by the number of refugees who have been locked out by the number of years it would have taken for another refugee-terrorist death yields the $159.4 million cost per life saved. 

Yearly economic benefit for Americans from all immigrants is $41,265,600,000 according to lowest estimates from Borjas ($17.194 trillion times 0.24 percent). Multiply that by .0503 (percent that’s refugee) to get $2,077,246,422. Divide that by the stock of immigrants currently alive who entered as refugees (2,179,170) to get $953.24 wage benefit to all Americans per year, per refugee. I then assume that they only add half that amount because they are poor so the result is $476.61 immigration surplus per refugee per year.

From 2000 through the end of 2015, 6,329 immigrants and non-immigrants were ineligible for visas because of terrorist activities or association with terrorist organizations (Figure 1). A full 99.5 percent of the denials were for terrorist activities. Keeping terrorists, criminals, and other national security threats out of the United States is one of the federal government’s important immigration responsibilities but many of the people denied a visa shouldn’t have been. An overly broad definition of providing “material support” to terrorists results in bans that make little sense and do nothing to defend Americans from terrorist attacks.

For example, a young man who was living with his uncle in Colombia was attacked by paramilitaries who then forced the young man to march for several days.  Along the way, paramilitaries shot and killed many of those in the man’s group. Often times he was forced to watch the executions and, at times, to dig the graves of the dead. Sometimes the man was told that it was his own grave he was being forced to dig. The government denied his attempt to settle in the United States because his forced digging of graves provided “material support” in the form of “services” to a terrorist organization. 

Another example is of a Liberian woman who was abducted, raped repeatedly, and held hostage by LURD rebels after they invaded her house and killed her father. During this time they forced her to cook, clean, and do laundry. She eventually escaped and is now in a refugee camp but her attempted resettlement in the United States was put on hold because the tasks she had done for the rebels, such as doing laundry, provided “material support” in the form of “services” to a terrorist organization. 

Those who are denied a visa for this reason can get an exemption based on their individual circumstances, whether the material benefit was knowingly or intentionally given to terrorists, for certain medical reasons, and on a group-by-group basis for those who aided foreign groups supported by the U.S. government. A full 55 percent of those who are originally denied a visa on terrorism grounds are eventually overcome for this reason. The high waiver rate shows just how unnecessary and arbitrary many of these visa denials are in order to prevent domestic terrorist attacks. 

Figure 1

Visas Denied for Terrorism and Those Overcome by Waivers

Denied All      

212(a)(3)(B) Terrorist Activities

212(a)(3)(F) Terrorist Organizations

2000

101

0

2001

84

0

2002

49

25

2003

100

2

2004

77

0

2005

112

2

2006

120

0

2007

256

1

2008

418

0

2009

470

0

2010

621

0

2011

690

0

2012

890

0

2013

619

1

2014

707

2

2015

982

0

All

6296

33

      Overcome All    

212(a)(3)(B) Terrorist Activities

212(a)(3)(F) Terrorist Organizations

2000

31

0

2001

0

0

2002

0

0

2003

15

0

2004

26

0

2005

37

1

2006

39

1

2007

138

0

2008

266

0

2009

343

0

2010

387

0

2011

483

0

2012

470

0

2013

352

0

2014

457

0

2015

426

0

All

3470

2

Source: State Department, Report of the Visa Office, Statistical Table XX https://travel.state.gov/content/visas/en/law-and-policy/statistics/annual-reports.html

Since at least the days of ancient Athens—which Demosthenes tells us had a five-year statute of limitations for nearly all cases—governments have limited the time period within which punishment or compensation may be sought. Statutes of limitations exist to protect defendants from vindictive or arbitrary lawsuits and prosecutions brought long after their memories have faded and records that might have been used to rebut a claim lost. They ensure that we need not spend our lives constantly anxious about the possibility of the distant past coming back to haunt us over half-forgotten slights.

These are the basic animating purposes behind 28 U.S.C. § 2462, which imposes on the federal government a five-year limitations period for any “action, suit, or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise,” and the Supreme Court’s unanimous 2013 opinion in Gabelli v. SEC (in which Cato also filed a brief) finding no valid justification for the Securities and Exchange Commission to pursue enforcement actions seeking civil penalties more than five years after the relevant conduct had occurred.

Unfortunately, the SEC didn’t learn its lesson and has consistently attempted to circumvent and subvert Gabelli by arguing that the relief it seeks in its years-overdue enforcement actions—monetary disgorgement, injunctions requiring defendants to obey the law, and declaratory judgments that laws were violated—is actually “equitable” and not a form of civil penalty covered under § 2462. Disgorgement—requiring a defendant to return their ill-gotten gains—has indeed traditionally been a way to remedy unjust enrichment rather than a punishment, but the SEC’s use of it has been anything but equitable.

The agency has brought disgorgement actions not to make the victims of wrongdoing whole, aid in public securities-law enforcement, or encourage private compliance, but to punish unsuspecting defendants for decades-old conduct, destroy their reputations and careers, and score massive financial judgements that go straight to the vaults of the U.S. Treasury rather than the pockets of any victims. When one actually looks at what the SEC is doing in context, it becomes clear that this “equitable” relief is functionally a “civil fine, penalty, or forfeiture, pecuniary or otherwise,” subject to § 2462’s five-year limitations period.

While a careful application of § 2462 is itself sufficient to resolve this case, it is also important to note the serious reasons that actions like those taken by the SEC are in deep opposition to good public policy. Allowing the SEC—an administrative juggernaut more than capable of bringing meritorious claims in a timely manner—to pursue antiquated claims distracts the agency from its stated priorities of pursuing current malfeasance. It also misleads Congress and the public into believing that modern markets are rife with misconduct, in addition to casting a never-ending shadow of potential liability over anyone involved in financial markets.

This is why Cato has filed an amicus brief in support of Charles Kokesh, a man now entangled in the SEC’s stale web, to urge the Court to put an end to the SEC’s gamesmanship and categorically hold that the agency may not institute an enforcement action seeking disgorgement or injunctive/declaratory relief more than five years after the underlying conduct occurred.

The Supreme Court will hear argument in Kokesh v. SEC on April 18, with a decision expected by the end of June.

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