Forum Post: Citigroup Settlement Tossed: Judge Tells SEC To Get It Together

Judge Blocks Citigroup Settlement With S.E.C.

http://www.nytimes.com/2011/11/29/business/judge-rejects-sec-accord-with-citi.html?pagewanted=all

By EDWARD WYATT - November 28, 2011

WASHINGTON — Taking a broad swipe at the Securities and Exchange Commission’s... http://topics.nytimes.com/top/reference/timestopics/organizations/s/securities_and_exchange_commission/index.html?inline=nyt-org ...practice of allowing companies to settle cases without admitting that they had done anything wrong, a federal judge on Monday rejected a $285 million settlement between Citigroup... http://topics.nytimes.com/top/news/business/companies/citigroup_inc/index.html?inline=nyt-org ...and the agency.

The judge, Jed S. Rakoff... http://topics.nytimes.com/topics/reference/timestopics/people/r/jed_rakoff/index.html?inline=nyt-per ...of United States District Court in Manhattan, said that he could not determine whether the agency’s settlement with Citigroup was “fair, reasonable, adequate and in the public interest,” as required by law, because the agency had claimed, but had not proved, that Citigroup committed fraud.

As it has in recent cases involving Bank of America, JPMorgan Chase, UBS and others, the agency proposed to settle the case by levying a fine on Citigroup and allowing it to neither admit nor deny the agency’s findings. Such settlements require approval by a federal judge....

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Citigroup Settlement Tossed: Judge Tells SEC To Get It Together

http://www.huffingtonpost.com/2011/11/28/sec-citigroup-settlement-judge-jed-rakoff_n_1117140.html

-11/28/11-

(HuffingtonPost- Loren Berlin) "...In wording that sounds like it was written for those Occupy Wall Street protesters decrying the nation's big banks and their outsized influenced, Rakoff wrote: "In any case like this that touches on the transparency of financial markets whose gyrations have so depressed our economy and debilitated our lives, there is an overriding public interest in knowing the truth. ... The SEC, of all agencies, has a duty, inherent in its statutory mission, to see that the truth emerges; and if it fails to do so, this Court must not."

The ruling "is precedent setting," said a prominent securities lawyer who has represented investors in class-actions suits against financial institutions and is familiar with the decision.

The SEC often settles with large financial institutions without requiring an admission of guilt. And it's extremely rare for a judge to throw out a settlement -- though Judge Rakoff did once previously, in 2009, when he ruled that Bank of America and Merrill Lynch had "effectively lied to their shareholders" when the two firms paid out $3.6 billion in executive bonuses shortly before the bank acquired Merrill and after the bank had accepted billions of dollars in federal bailout funds.

"The way the SEC has always proceeded is a slap on the wrist and a cost of doing business, and all these big banks know it," the securities lawyer said. "If they get in trouble with the SEC, they know they can buy their way out of it without admitting anything. Ninety-nine out of 100 judges go along with it because it is the machine that greases the wheels...."

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