Monday, November 28, 2011
Here come da judge! Here come da judge!
United States District Court judge Jed Rackoff has thrown out another SEC sweetheart settlement, this time with Citicorp. This time it looks like he is serious.
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 last settlement he threw out was over a pitifully small sum for the crime involved. This time he is going after a major point of abuse, the non admission/denial of guilt. If he can force the SEC to require one or the other, the evidence will become part of the record and give a better sense of how sweet the settlements really are. Judge Rakoff is now officially in the crosshairs of the corporate state.
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.
That condition gives a company or individual an advantage in subsequent civil litigation for damages, because cases in which no facts are established cannot be used in evidence in other cases, like shareholder lawsuits seeking recovery of losses or damages.
The S.E.C.’s policy — “hallowed by history, but not by reason,” Judge Rakoff wrote — creates substantial potential for abuse, the judge said, because “it asks the court to employ its power and assert its authority when it does not know the facts.”
Judge Rakoff also refers at one point to Citigroup as “a recidivist,” or repeat offender, which has violated the antifraud provisions of the nation’s securities laws many times. The company knew that the S.E.C.’s proposed judgment – that it cease and desist from violating the antifraud laws – had not been enforced in at least 10 years, the judge wrote.
Subscribe to Posts [Atom]
Post a Comment