Federal Judge Jed S. Rakoff [1]was not pleased with the Security and Exchange Commission (SEC) proposed settlement with Citigroup. Citigroup violated previous agreements, lied to its customer about the mortgage bonds they were selling and bet against the bonds. Citigroup’s customers lost $700 million while the bank made a profit of $160 million. The SEC was willing to let Citigroup off with no admission of wrong doing and what the judge considered to be an inadequate fine.
The two articles on the subject disagree on the amount of the fine and both are listed to provide a range of opinion.
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Finally, a Judge Stands up to Wall Street [3]
By Matt Taibbi
Federal judge Jed Rakoff [1], a former prosecutor with the U.S. Attorney’s office here in New York, is fast becoming a sort of legal hero of our time. He showed that again yesterday when he shat all over the SEC’s latest dirty settlement with serial fraud offender Citigroup, refusing to let the captured regulatory agency sweep yet another case of high-level criminal malfeasance under the rug.
The SEC had brought an action against Citigroup for misleading investors about the way a certain package of mortgage-backed assets had been chosen. The case is very similar to the notorious Abacus case involving Goldman Sachs, in which Goldman allowed short-selling billionaire John Paulson (who was betting against the package) to pick the assets, then told a pair of European banks that the “designed to fail” package they were buying had been put together independently. Read More [3]
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Judge Unloads on Deal SEC Struck With Citi [5]
By Chad Bray
A federal judge sharply questioned the Securities and Exchange Commission about why it didn’t force Citigroup Inc. to admit to “what the facts are” before the agency agreed to settle a mortgage-bond case for $285 million.
During an hour-long hearing Wednesday, U.S. District Judge Jed S. Rakoff, an outspoken critic of the SEC’s approach to securities-fraud settlements, challenged the SEC on why the regulator allowed Citigroup to settle the case using boilerplate language in which it neither admits or denies wrongdoing.
“Why does that make any sense in this context?” the judge said.
He also pointed out that the SEC—which had sued and reached settlements with Citigroup in the past for alleged bad behavior—hasn’t pursued contempt charges when the bank, or other financial firms, has violated previous settlements by subsequently breaking federal securities laws. The SEC said at the hearing that Citigroup has violated prior agreements twice in the past decade.
“It’s just for show. We don’t ever intend to use it?” the judge said, referring to the SEC’s request, as part of the settlement, for an order barring Citigroup from future violations of federal securities laws. Read More [5]