SEC to Appeal Ruling Overturning Settlement with Citigroup

Econintersect:  The SEC (Securities and Exchange Commission) has cited “legal error” in the decision in late November by Federal District Court Judge Jed K. Rakoff (pictured) which rejected an agreement for Citigroup to pay $285 million and accept an injunction against future violations of an antifraud provision of federal securities laws.  The SEC said it would ask the United States Court of Appeals for the Second Circuit to overturn the opinion.  A key element of the settlement involved stipulation that Citigroup admitted no wrongdoing.  It was another decision by the SEC to accept “we did nothing wrong and we won’t do it again” settlements involving trivial (for trillion dollar banksters) monetary payments.

According to a quote from the New York Times in a GEI News article, the November 29 ruling specifically stated that the factor that no admission of guilt was part of the agreement made the settlement non-credible (Econintersect word, not Judge Rakoff). From GEI News:

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.

Also from the same GEI News article:

Editor’s questions: When will blatant disregard for the law end? Will Judge Rakoff be the catalyst that starts meaningful prosecution of financial system fraud?

It appears the answer is – not if the SEC has anything to say about it.

Here is what Business Insider had to say about the case tonight:

In doing so, Judge Rakoff bucked a practice that’s been in play since the 1970s. The SEC has allowed banks to pay small sums (‘pocket change,” in Rakoff’s words) and neither confirm nor deny their guilt in civil suits against the agency. Rakoff thinks that practice is unjust.

So given the Judge’s order, you would think the SEC might prepare itself to go to trial with Citi so the bank could maintain its innocence (a scary prospect for both parties). Or that both parties, at the very least, would get their calculators out to tabulate a sum that might make the Judge happy.

Not so. The SEC would prefer to create a 5 person commission to appeal the Judge’s ruling and nip this problem in the bud. If Rakoff can do it once, he can do it again no? The SECs director has argued that this would make it difficult to police Wall Street. Moreover, what if other Judge’s decide to follow in Rakoff’s footsteps?

Appealing could save the SEC the trouble of lengthy, difficult, expensive trials against highly paid bank lawyers in the future. And even right now, Rakoff’s judgment is effecting settlement talks the SEC is having with banks for cases it’s already started.

Sources: The New York Times, GEI News and Business Insider