Yesterday Marc Gabelli had his day in front of the U.S. Supreme Court, and the way Reuters tells it the Gabelli Funds [profile] scion should be pretty pleased.

Sarah Lynch and Jonathan Stempel of the wire service report that, in oral argument yesterday, Justice Elena Kagan (a liberal appointed by President Obama), Justice Stephen Breyer (a liberal appointed by President Clinton) and Justice Antonin Scalia (a conservative appointed by President Reagan) questioned the SEC's contention that the five year statute of limitations clock starts when they're able to detect the alleged fraud, as opposed to when the fraud occurs.

The SEC claims that Gabelli and Gabelli Funds chief operating officer Bruce Alpert let market-timers (Folkes Asset Management, now called Headstart Advisers) into the Gabelli Growth Fund from 1999 to 2002. Yet the SEC didn't sue the duo until April 2008, almost five years after then-New York Attorney General Eliot Spitzer attacked market timers in September 2003 and more than five years after the alleged Gabelli market timing occurred.

"The government had decided not to go after market timers," Kagan said yesterday. "And it changed its decision when a state attorney general decided to do it, and it embarrassed them."

"Is there much difference between the rule you are arguing for and a rule that there is no statute of limitations," Scalia asked Jeffrey Wall, a U.S. Department of Justice lawyer arguing the SEC's case.

"[This case] is shaping up to be another SEC embarrassment, and richly deserved," the Wall Street Journal wrote today in an editorial.

In March 2010 a U.S. district court judge dismissed most of the SEC's case. Then in August 2011 the U.S. Second Circuit Court of Appeals reopened the case, and in September 2012 the Supreme Court granted certiorari in the case. A decision is expected during the Supreme Court's current term, which ends in June. 

Edited by: Neil Anderson, Managing Editor


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