November 28, 2011
Judge Rakoff Rejects SEC-Citigroup Settlement
In a decision that probably surprises no one, Judge Jed Rakoff refused to approve the proposed $285 million settlement between the SEC and Citigroup resolving charges that the bank failed to disclose to investors its role in selecting investments in a $1 billion mortgage-bond deal and taking a short position in those assets.(Download SECCITI11282011) The judge stated that the settlement did not provide the Court with a sufficient evidentiary basis to know whether the requested relief was justified, and, as he has done previously, he criticized the agency's policy of allowing defendants to enter into consent judgments without admitting or denying the allegations.
[W]hen a public agency asks a court to become its partner in enforcement by imposing wide-ranging injunctive remedies on a defendant, enforced by the formidable judicial power of contempt, the court, and the public, need some knowledge of what the underlying facts are: for otherwise, the court becomes a mere handmaiden to a settlement privately negotiated on the basis of unknown facts, while the public is deprived of ever knowing the truth in a matter of obvious public importance.
The judge goes on to say that "[i]t is harder to discern from the limited information before the Court what the S.E.C. is getting from this settlement other than a quick headline."
The court concludes by directing the parties to be ready to try the case on July 16, 2012.
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