Feds Too Slow to Nail GE Employee Fraud Scheme

MANHATTAN (CN) - The statute of limitations elapsed before prosecutors indicted three General Electric employees later convicted of a multi-year price fixing scheme, the 2nd Circuit ruled.

Before their appeal, Peter Grimm, Dominick Carollo, and Steven Goldberg had been serving sentences ranging from three to four years in prison after being convicted of fixing below-market rates on interest the utility company paid to municipalities.

The trio had worked together in 1999, until Goldberg took a job with another provider, nonparty Financial Security Assurance, Inc.

According to the appellate court's summary, the conspiracy lasted between August 1999 and May 2004, and the men were indicted on July 27, 2010 - just shy of the 5-year statute-of-limitations for general conspiracy and 6-year statute for conspiracy to defraud the United States.

Prosecutors argued that every depressed interest payment that General Electric made to the municipalities represented an overt act by the three men.

On Monday, two 2nd Circuit judges disagreed with that method of calculation.

"Payments of interest on a [Generalized Interest Contract] are ordinary commercial obligations, made pursuant to a common form of commercial arrangement; they are noncriminal in themselves; they are made unilaterally by a single person or entity; and they are made indefinitely, over a long time, typically up to 20 years or more," U.S. Circuit Judge Dennis Jacobs wrote in the majority opinion.

In her dissent, U.S. Circuit Judge Amalya Kearse replied, "In my view, it was permissible for the jury to find that (a) an objective of the conspiracies was, as alleged, to enable the providers to make their periodic interest payments at artificially suppressed rates, and (b) that objective existed within the limitations period. It was also permissible for the jury to find that all of the providers' interest payments were acts in furtherance of the conspiracies. Indeed, the payments were essential to the conspiracies' success: If the payments were not made, the providers would be in breach of the investment contracts and would cease to achieve their conspiratorial goals of economic gain through payments of interest below fair market rates."

An attorney for Peter Grimm could not immediately be reached for comment after business hours.

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