/ Government / Courts / SEC Tired of Fighting Big Banks-Calls Federal Judge Rakoff Refusal to Approve Citigroup Settlement-Shortsighted.On November 28, 2011, Judge Jed S. Rakoff told the Securities and Exchange Commission (SEC), it’s proposed settlement with Citigroup didn’t pass the puke test. Rakoff refused to be the “handmaiden” to the regulatory institution. In response, the SEC issued a press release that reads like a temper tantrum. A public scream standing in stark contrast to the brilliant judicial decision.
The dust-up occurred because the SEC rolled over to give Citigroup a no admissions of guilt, get out of jail free card, knowing Citi employees admitted knowledge that the CDO portfolio (marketing of collateralized debt obligations the bank was also selling short) was a poor investment and willingly defrauded investors. Previously released emails of Citi personnel described the portfolio as “dogsh!t.”
The SEC publicly admonished the Judge that he didn’t understand how things were done at the regulatory agency while at the same time cried that they are overworked and have other fish to fry. They can’t be bothered with little things like scienter.* Moreover, the SEC prefers settlements, churning them out left and right, holding no one responsible for the economic collapse of this country.
In truth, the Judge knows the law and the statutory missions of the SEC, detailed in the following eloquent, long overdue soliloquy:
“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 fails to do so, this Court must not, in the name of deference or convenience, grant judicial enforcement to the agency’s contrivances.”
Estimates are that Citigroup made a $3.8 billion profit from the bogus investment portfolio. The investors lost over $700 million. The $285 million offer to settle is a joke. The Judge made clear he would not allow corporations to continue to buy their way out of fraud from “a cost of doing business” fund. The Judge demands the truth to be revealed and the public protected.
Public service is a public trust. Federal employees have a duty to protect the public interest. Apparently, the SEC forgot their duties and the fact that the Court is the final arbiter. The legal team at the SEC that crafted the Citigroup deal need to remember they are federal service not bank employees. It’s refreshing to see Judge Rakoff remind government workers who employs them. show.php?db=special&id=138
Rakoff’s words to the SEC and big banks has been globally hailed as public policy genius. Thank you Judge Rakoff.
The trial is scheduled for July 16, 2012.
*Scienter means knowingly. See Black’s Law Dictionary. scienter
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