Greetings, folks. Hope everyone had a good Thanksgiving…
Just a quick update on a big piece of news that came through yesterday. In one of the more severe judicial ass-whippings you’ll ever see, federal Judge Jed Rakoff rejected a slap-on-the-wrist fraud settlement the SEC had cooked up for Citigroup.
I wrote about this story a few weeks back when Rakoff sent signals that he was unhappy with the SEC’s dirty deal with Citi, but yesterday he took this story several steps further.
Rakoff’s 15-page final ruling read like a political document, serving not just as a rejection of this one deal but as a broad and unequivocal indictment of the regulatory system as a whole. He particularly targeted the SEC’s longstanding practice of greenlighting relatively minor fines and financial settlements alongside de facto waivers of civil liability for the guilty – banks commit fraud and pay small fines, but in the end the SEC allows them to walk away without admitting to criminal wrongdoing.
This practice is a legal absurdity for several reasons. By accepting hundred-million-dollar fines without a full public venting of the facts, the SEC is leveling seemingly significant punishments without telling the public what the defendant is being punished for. This has essentially created a parallel or secret criminal justice system, in which both crime and punishment are adjudicated behind closed doors.
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- Is Rakoff Fever Spreading? (blogs.wsj.com)
- Rejected SEC-Citi Deal Prompts Another Challenge to Settlement (ibtimes.com)
- Judge Hearing Sirius XM Case Rejects CitiGroup Settlement (siriusbuzz.com)
- Taibbi on the SEC & our “parallel, secret criminal justice system” (americablog.com)
- Koss Corporation’s SEC Settlement May Get Rakoff’d. (financiallyregulated.com)
- Court Rules SEC Can No Longer Be ‘Yapping, Small Dog’ (huffingtonpost.com)
- Sen. Grassley Praises Judge Who Blocked Citigroup Settlement: ‘Judge Rakoff Is Right’ (thinkprogress.org)