account
search
search

Judge slams SEC for Citigroup settlement

  |   Nov. 28, 2011 at 7:12 PM
NEW YORK, Nov. 28 (UPI) -- A federal judge has rejected a U.S. Securities and Exchange Commission settlement with Citigroup, saying the agency isn't meeting its legal responsibilities.

The SEC has long contended allowing firms to pay a fine without admitting wrongdoing allows it to pursue more cases than it would have time for if every case went to trial, The Wall Street Journal reported Monday.

On the other hand, federal Judge Jed Rakoff, in rejecting a $285 million SEC and Citigroup settlement, said that kind of murky legal framework is precisely the problem. The court, in this case, would be signing off on a settlement without knowing the facts -- that is, whether Citigroup is guilty or not -- Rakoff ruled.

The New York Times said Rakoff's ruling called SEC settlements, "hallowed by history, but not by reason."

The settlement "asks the court to employ its power and assert its authority when it does not know the facts," he wrote.

In addition, Rakoff, who has rejected other SEC settlements, stood his ground on the concept of whether or not the settlements help private parties pursue remedies in civil courts.

By stopping short of proclaiming a firm's innocence or guilt, an SEC ruling gives investors little go to by in pursuit of a civil settlement, Rakoff said.

The deal Rakoff rejected involves an SEC claim that Citigroup created complex derivatives when the housing market first began to slide in 2007. The bank then bet against the packages it sold to investors, who lost $700 million, while the bank gained $160 million, The Washington Post reported.

Citibank did not comment on the ruling. Neither did the SEC, the Post said.

In rejecting the settlement, Rakoff ordered the SEC and Citigroup to prepare for trial.

"Even in our nation, apologists for suppressing or obscuring the truth may always be found. But 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, in the name of deference or convenience, grant judicial enforcement to the agency's contrivances," Rakoff wrote.

Topics: Jed Rakoff
© 2011 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
x
Feedback