WASHINGTON _ The Supreme Court ruled Monday against an Orange County, Calif., couple accused of running a $27 million stock scheme and said the government can take back all of their ill-gotten gains.
The 8-1 decision is a victory for the Securities and Exchange Commission and its power to "disgorge" money from those who obtained it illegally.
The couple, Charles Liu and Xin Wang, were accused of luring investors to send them money for a cancer treatment center that was never built, and then spending much of the proceeds for their own benefit.
The SEC demanded they "disgorge" the entire $27 million that was collected, and it won in the lower courts.
The Supreme Court on Monday affirmed the SEC's power to seek disgorgement of ill-gotten gains, but told the 9th Circuit Court to reconsider the amount. The couple said they spent some of the money for legitimate business expenses.
"The court holds today that a disgorgement award that does not exceed a wrongdoer's net profits and is awarded for victims is equitable relief permissible under" federal law, said Justice Sonia Sotomayor for the court in Liu vs. SEC. But the "case is remanded for the courts below to ensure the award was so limited."
Justice Clarence Thomas dissented and said he would have ruled the SEC has no power to "disgorge" illegal gains from stock frauds.
