Judge Jed Rakoff apparently wasn't too fond of the SEC's latest settlement with Citigroup relating to securities fraud allegations with some of their shoddy CDO's. Judge Rakoff smacked the proposed $285 million dollar settlement as a blatant hand-out to Citi by the SEC. Citi was caught stuffing a fund with crappy CDO tranches and then betting against them, after they sold the fund to investors. Sound familiar?
Rakoff had a few notable quotes in his 15 page ruling on matter...
Here, the S.E.C.’s long-standing policy – hallowed by history, but not by reason – of allowing defendants to enter into Consent Judgments without admitting or denying the underlying allegations, deprives the Court of even the most minimal assurance that the substantial injunctive relief it is being asked to impose has any basis in fact.
A large part of what the S.E.C. requests, in this and most other such consent judgments, is injunctive relief... The Supreme Court has repeatedly made clear, however, that a court cannot grant the extraordinary remedy of injunctive relief without considering the public interest.
As for common experience, a consent judgment that does not involve any admissions and that results in only very modest penalties is just as frequently viewed, particularly in the business community, as a cost of doing business imposed by having to maintain a working relationship with a regulatory agency, rather than as any indication of where the real truth lies. This, indeed, is Citigroup's position in this very case.
Finally, 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. In much of the world, propaganda reigns, and truth is confined to secretive, fearful whispers. Even in our nation, apologists for suppressing or obscuring the truth may always be found. But the S.E.C., 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.
Covering up crimes with no admission of wrongdoing appears to be standard policy for the SEC, as noted by the New York Times. They found 51 instances involving 19 different companies, where the agency claimed the company broke the laws they previously agreed never to violate. Who would have thought these fair-minded corporations would continue to break the law when they never have to do jail time for previous crimes. When it comes to the public interest, the SEC apparently has no interest at all.