Most “white collar” crimes involve a business or one or more individuals obtaining assets illegally – typically through some type of fraudulent activity. That means if they’re convicted or settle their case, in addition to facing fines and potentially even incarceration, they’ll be ordered to repay the money to their victims. This is known as “disgorgement.”
Disgorgement is intended to make victims whole. That means interest on the “ill-gotten gains” (as they’re commonly described) and possibly penalties to be paid directly to the victims (as opposed to the government) are often part of the disgorgement.
How the disgorgement amount is determined
When there are multiple victims and even sometimes in cases with only one victim, calculating the appropriate amount to be disgorged can be complicated. In federal cases, that’s often handled by the Securities and Exchange Commission (SEC).
The calculation involves determining how much of the profit received from a transaction was “ill-gotten gains” from illegal activity. That often can’t be (and isn’t) an exact calculation. In one insider trading case, a court ruled that the SEC’s calculation only needed to be a “reasonable approximation of the profits which are causally connected to the violation.”
Disgorgement amounts run the gamut. One well-known case involved the former CEO of Goldman Sachs, who was ordered to pay $550 million in his settlement with the SEC over that company’s role in the subprime mortgage crisis.
Disgorgement is one more thing to consider if you’re facing criminal charges as you determine how to respond to the charges. Having experienced guidance is critical to making the best decision and protecting your rights.