WASHINGTON — A federal appeals court freed three convicted bid-riggers from prison just before Thanksgiving because the statute of limitations had run out on their alleged violations, according to the court’s newly released opinion.

A three judge panel of the U.S. Court of Appeals for the Second Circuit ruled 2-1 last month to overturn the convictions of former General Electric bankers Dominick Carollo, Steven Goldberg, and Peter Grimm on grounds that the federal prosecutors did not move quickly enough to indict them for alleged fraud committed near the turn of the millennium.

The three had been convicted by a jury in a federal district court in May 2012, but appealed, partially on the grounds that the five-year limitation for wire fraud and the six-year limitation for conspiracy both expired years before the government charged the men in 2010.

The three-judge panel issued a brief order freeing the men, but their reasoning was uncertain until the release of the opinion, which was about two dozen pages and dated Dec. 9.

Justice Department antitrust division lawyers had successfully argued in district court that continuing interest payments on fraudulently-awarded guaranteed investment contracts continued to harm the public well after the GIC bids were rigged.

But the appeals court judges did not buy that argument. Circuit Judge Dennis Jacobs, writing for the majority, held that the government needed to show “overt” criminal acts more recently, and failed to do so.

“To satisfy the statute of limitations for general conspiracy, the government must establish that a conspirator knowingly committed at least one overt act in furtherance after July 27, 2005; to satisfy the statute of limitations for a fraud on the United States, the government must establish at least one overt act in furtherance after July 27, 2004,” Jacobs wrote. “Of the 55 overt acts alleged in the superseding indictment, the only ones that involved conduct after July 27, 2004 were the periodic interest payments made by providers to issuers pursuant to the GICs.”

The court found that the government’s legal theory went too far because under the logic employed by the prosecutors, some frauds could have virtually limitless statutes of limitations that would stretch beyond a human lifetime.

“The government’s position must be that a conspiracy continues so long as a stream of anticipated payments contains an element of profit,” wrote Jacobs. “But that proves too much. A conspiracy to corrupt the rent payable on a 99-year ground lease would, under the government’s theory, prolong the overt acts until long after any conspirator or co-conspirator was left to profit, or to plot.”

John Siffert, an attorney at Lankler Siffert & Wohl LLP who represented Goldberg, said the opinion reinforced earlier court decisions that payments are the results of a conspiracy, rather than a conspiratorial act in and of themselves. Siffert said his client is now safe from further government action on these charges.

Circuit Judge Amalya Kearse authored a dissenting opinion in which she found that, because the men worked for GE, the corporation was necessarily a co-conspirator and the artificially-depressed interest payments the bid-rigging allowed it to make were among the goals of the conspiracy. As such, the payments did represent ongoing criminal conduct within the statute’s time frame, she concluded.

“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,” Kearse wrote. “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.”

The case may have some implications for other bid-riggers appealing their convictions to the 2nd Circuit.

Former UBS AG bankers Peter Ghavami, Gary Heinz, and Michael Welty were convicted in August 2012 as part of the same government investigation, and their lawyers are currently reviewing the appeals court’s decision to see how it might be applicable to their case.

The government pursued a different legal theory against the UBS defendants, attorneys familiar with the case said, so their appeal might not be heavily impacted by this opinion.

Marc Mukasey, an attorney at Bracewell & Giuliani who represents Heinz, said that the opinion is revealing of the government’s case. “The reversal speaks to, among other things, the over-zealous and over-aggressive position the antitrust division took at every step of the investigation,” Mukasey said.

A DOJ spokesman said department officials are reviewing the opinion and have no comment.

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