The U.S. Supreme Court ruled Monday that former Santa Fe venture capitalist Charles Kokesh cannot be forced by the Securities and Exchange Commission to pay it nearly $35 million for misappropriating investor money.

The Supreme Court’s 9-0 decision limits the federal government’s ability to impose penalties for years-old wrongdoing by investment fund managers or their companies.

Kokesh’s case had become a cause for conservative groups aiming to rein in the government’s power to police the financial sector. Business groups, including the U.S. Chamber of Commerce, and Mark Cuban, owner of the NBA’s Dallas Mavericks, were among those that sided with Kokesh.

The case began in 2009 when the SEC sued Kokesh, charging that he stole about $35 million in funds from tens of thousands of investors between 1995 and July 2007.

Kokesh had founded Technology Funding Partners and Technology Funding Medical Partners, offering small investors an opportunity to capitalize on startups.

Some of the money Kokesh made during his time in Santa Fe went toward purchasing the Santa Fe Horse Park, which was used for recreational and collegiate-level polo matches and equestrian events.

But as the economy slowed, Kokesh’s funds collapsed.

The SEC accused him of passing off improper payments to himself as valid expenses for rent, salaries, taxes and bonuses.

A federal jury sided with the SEC after a five-day trial. U.S. District Judge Stephan M. Vidmar ordered Kokesh to not only pay a penalty of about $2.4 million, but also the total amount of money the federal government said he had misappropriated since 1995, as well as interest.

Kokesh’s lawyer challenged the bigger penalty.

Not only was Kokesh broke and the records from his businesses gone, his lawyers argued the penalty was too broad, exceeding the usual five-year time limit on seeking penalties. Under that rule, he could not be forced to repay money the government said he had stolen before 2004.

The SEC’s lawyers countered the nearly $35 million was not a penalty. Instead, the federal government argued it was merely trying to recoup money stolen from investors and that the five-year limit did not apply.

The 10th U.S. Court of Appeals in Denver sided with the SEC and demanded Kokesh pay. But another appeals court had ruled against the government in a similar case, and Kokesh’s lawyer pressed the Supreme Court to weigh in.

The court decided the $35 million would have been a penalty, not just an effort to recoup ill-gotten cash, and cannot be imposed for actions more than five years before the case was filed.

Such penalties are imposed to deter wrongdoing and to punish a perpetrator, Justice Sonia Sotomayor wrote for the court while noting the money does not necessarily go back to the victims but could instead go to the government.

Kokesh’s attorney, Clinton Marrs, argued that time limits on such cases — known as statutes of limitations — are key to protecting defendants from government overreach.

If the government presses cases concerning events that unfolded decades in the past, witnesses may have died, memories may have faded and evidence may be long gone, Marrs said.

“I had a lot harder time defending him because I was needing to track down things that happened literally 18 years ago,” Marrs said. “Making the government prove its case protects bad people. Unquestionably, it protects bad people. But it also protects good people.”

Financial industry groups backed Kokesh in the case as did the conservative think tank The Cato Institute and Cuban, the venture capitalist turned NBA team owner who has had his own tangles with the SEC, arguing the case was an opportunity to rein in the federal government. No major organizations or law firms rallied to the SEC’s defense.

Ronald Betman, a lawyer for the firm Ulmer & Berne in Chicago who has worked on cases involving the SEC, said the decision will take ammunition from the federal agency in negotiating potential settlements with companies.

“There no longer is any open question as to how far back the SEC can go” in imposing penalties, he wrote in an email.

A spokesperson for the Securities and Exchange Commission declined comment on the decision, and a man who answered a phone number listed for Kokesh, 69, referred questions to Marrs.

Kokesh’s son, former congressional candidate and gun rights advocate Adam Kokesh, took to Twitter after the decision.

“Not just the SEC, but other federal agencies as well, have ‘created’ special powers for themselves to collect funds from businesses going back many more years than was ever intended to be legal by Congress. Because my dad fought back, a huge new precedent has been set and billions of dollars will be kept away from the feds because of this decision!” Adam Kokesh wrote. “It’s great to be part of a legacy of limiting government’s ability to steal from people!”

Contact Andrew Oxford at 505-986-3093 or aoxford@sfnewmexican.com. Follow him on Twitter at @andrewboxford.