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7th Circuit Affirms SEC Ruling Against Ex-CFO

(CN) - The 7th Circuit upheld a ruling for the Securities and Exchange Commission in its fraud complaint against former Waste Management Chief Financial Officer James Koenig.

The lower court heard expert testimony that Koenig's accounting methods of netting, basketing, and bundling misled investors into thinking the company was in better financial shape than it was.

As a result, Koenig was forced to repay $2.1 million in bonuses and interest he earned for the company's seemingly strong performance in 1992, 1994, and 1995.

The company lost $3 billion in stock value after rescinding its earnings statement in 1997.

Judge Easterbrook of the Chicago-based federal appeals court denied Koenig's appeal that the government's suit was untimely. The judge ruled that in a fraud case, the time on the statute of limitations starts when the crime is discovered, not when it is committed, because it is a "concealed wrong."

"The United States is entitled to the benefit of this rule even when it sues to enforce laws that protect the citizenry from fraud, but is not itself a victim," Easterbrook added.

Easterbrook also denied Koenig's appeal that the jury should have been limited to asking "clarifying" questions to the witnesses.

"Lawyers should want to know when some jurors are tending the other side's way, so they can make adjustments to their presentation," the judge wrote.

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