The government has often used continuing crime theories such as conspiracy as a means to prosecute defendants when the statute of limitations on the underlying crimes may have expired. Following the December 2013 decision in United States v. Grimm, however, prosecutions in the Second Circuit based on a continuing conspiracy theory may have been dealt a major blow. In Grimm, the U.S. Court of Appeals for the Second Circuit overturned the convictions of three corporate employees who were convicted of conducting a scheme to fix below-market interest rates on guaranteed investment contracts (GICs) by bribing various brokers to rig GIC auctions. The court held that interest payments on fraudulently issued GICs did not constitute overt acts in furtherance of a conspiracy and thus the interest payments could not be used as a means to extend the statute of limitations. The government has filed a petition for a panel rehearing and rehearing en banc. This decision, if sustained, may significantly limit the government’s ability to prosecute otherwise time-barred actions and provides defendants with new grounds to assert statute of limitations defenses.
Alleged Auction Rigging Scheme
Following a bond offering, municipalities often have more cash than is needed to meet the current expenses of their underlying capital projects.1 To generate additional revenue while the funds are not yet needed, a municipal issuer may invest in a GIC provided by a financial institution with a high credit rating.2 GICs pay periodic interest and have fixed maturities, but generally permit the issuer to call the principal at any time, thus terminating the contract.3
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