A Judge Uses Common Sense

Ken AshfordCorporate Greed, CrimeLeave a Comment

The New York Times is reporting that federal judge Jed Rakoff has thrown out a proposed settlement between Citigroup and the SEC. The SEC had agreed to $285 million in exchange for no admission of wrongdoing in a complaint about Citigroup defrauding investors in a 2007 residential mortgage backed security. Citigroup had told the investors a third party was picking what assets were securitized, when in fact the firm did it themselves. To make matters worse, Citigroup put bad mortgages into the security and then bet against them without telling their investors of their position. According to the Times, "Investors lost $700 million in the fund, according to the S.E.C., while Citigroup gained about $160 million in profits." 

Judge Rakoff thought $285 million and no admission of wrongdoing or the facts of the case was not good enough for the SEC and wants them to go back and try again, this time with justice in mind – as opposed to what's good for Citigroup. 

The judge, Jed S. Rakoff of United States District Court in Manhattan, ruled that the S.E.C.’s $285 million settlement, announced last month, is “neither fair, nor reasonable, nor adequate, nor in the public interest” because it does not provide the court with evidence on which to judge the settlement.

The ruling could throw the S.E.C.’s enforcement efforts into chaos, because a majority of the fraud cases and other actions that the agency brings against Wall Street firms are settled out of court, most often with a condition that the defendant does not admit that it violated the law while also promising not to deny it.

This truly is justice.  While Citigroup tries to minimize its damage, and the SEC (in the pockets of the banks to begin with) is shirking its duties of being a regulatory agency, someone has the balls to actually think about the investors who were defrauded, and to think about exacting punishment on the fraudulent behavior of Citigroup.

More stories like this please.