Judge Jed Rakoff Chides SEC Again In Citigroup case

The U.S. Securities and Exchange Commission got a fresh dressing-down from the judge who rejected its $285 million settlement with Citigroup Inc, as he said the regulator kept him out of the loop on its efforts to salvage the case.

In his latest sharply-worded order, U.S. District Judge Jed Rakoff chastised the SEC for not telling him it had filed an emergency request with an appeals court to put the case on hold, after making the same request to him.

So when Rakoff on Tuesday issued a ruling opposing any delay in the case, he was beaten to the punch; 78 seconds earlier, the 2nd U.S. Circuit Court of Appeals had granted the SEC the temporary halt it sought.

He also accused the SEC and Citigroup of potentially "misleading" the court, saying they called him around 3:30 p.m. EST (2030 GMT) on Tuesday to discuss the case, without mentioning the filing with the 2nd Circuit.

Less than an hour later, the 2nd Circuit ruled, and so did Rakoff. That 2nd Circuit order negated the work Rakoff said he had done over the weekend to get a ruling to the SEC as quickly as he could.

Rakoff wrote that he "spent the intervening Christmas holiday considering the parties' positions and drafting an opinion, so that (the court) could file it on December 27, i.e. the first business day after the Christmas holiday."

To prevent a recurrence, Rakoff ordered the SEC and Citigroup to "promptly notify" him of any filings they make in the appeals court.

An SEC spokeswoman had no immediate comment. A Citigroup spokeswoman declined to comment.

The $285 million settlement was intended to resolve charges that Citigroup sold risky mortgage-linked securities in 2007 without telling investors that it was betting against the debt, and causing more than $700 million of losses.

In rejecting the accord in November, Rakoff said the SEC's failure to require Citigroup to admit or deny its charges left him no way to know whether the settlement was fair. Rakoff also called the payout "pocket change" for the third-largest U.S. bank.

The 2nd Circuit case is SEC v Citigroup Global Markets Inc, 2nd U.S. Circuit Court of Appeals, No. 11-05227. The district court case is SEC v. Citigroup Global Markets Inc, U.S. District Court, Southern District of New York, No. 11-07387.

(Reporting By Aruna Viswanatha and Jonathan Stempel; Editing by Tim Dobbyn)

Copyright 2011 Thomson Reuters. Click for Restrictions.

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Comments

[zeitgeisttt]

12:00 AM on 01/14/2012

I would be very worried if I was Judge Jed Rakoff. Banksters have a way of doing things.

[offred]

03:52 PM on 01/03/2012

Hurray for Judge Rakoff.

I have a friend whose sister, a lawyer, retired from the SEC in 2007 because she was tired of pointing out questionable activities by the big banks and being told to shut up.

[suddenfun]

03:22 PM on 01/03/2012

I object to the fact that the lead in tag on the business news page list this as a story about a "controversial" judge. He is in the right and doing as should be done. The controversey is that it is not being done by the SEC. It sounds like a negative reflection on this public official who is going against the standard of corruption and deal making that is the sop for this type of thing. He's controversial because he is calling BS on this colusion between the crooks and the regulators. I don't think so...you should use a better adjective, like; tough, honest, etc.

[Jeffin90019]

01:21 PM on 01/03/2012

Is there really any question that SEC is criminally in bed with Citi? At least one judge sees this for what it is: a criminal racket.

[Eric Sarnoski]

01:00 PM on 01/03/2012

Finally a judge acting like a judge. Equal and equitable justice under the law !

[Captain Hindsight]

12:26 PM on 01/03/2012

The SEC needs to funded by the fines and a percentage of recoveries it can make from policing wall street not tax dollars. The need to be more like "DOG the bounty Hunter" not Wall streets "Lap Dog"!

[Peter Combs]

10:54 PM on 01/02/2012

The SEC is owned lock , stock and CDS by Banks and investment houses...it would appear they own a court as well..the 2nd Court has some explaining to do..

[noncash 86]

02:51 PM on 01/02/2012

What do you expect from 3rd. rate lawyers who sit with the banks for cocktail hour and laugh at honest judges. What the judge should do is direct the Attorney General to file criminal charges against all the banks who conspired with the rating agencies to defraud the public and cause the crash the economic system, which is still tottering on the brink of collapse.

[tlcpro]

11:48 AM on 01/02/2012

It's about friggin' time! I hate Citi Corp!

[irHenry]

11:41 AM on 01/02/2012

Seems once again that the SECs cozy relation with Wall Street has corrupted the agency.
It seems the current motto of "Protect the profit margin" is in no danger of being changed.
:(

[Elwise1]

11:30 AM on 01/02/2012

"controversial" why the demeaning spin in your headline? "Tough" Judge or "Honest" Judge actually taking time and care to do his work would fit as well

[Califishing]

06:51 PM on 01/01/2012

Talk about the system gone wild? A person can do everything right and legal and still go to jail. Read this: http://www.producersweb.com/r/pwebmc/d/contentFocus/?pcID=664c250183c4c4632eb445d022cbb4dd&pn=2

[strangetimes]

04:47 PM on 01/01/2012

SEC, needs to be an independent agency. It works for politicians that are Bought by the Corporations. They are directed by the Bought politicians to turn a blind eye to the corruption.

[Poppa70]

02:50 AM on 01/02/2012

Or neuter it by giving it woefully inadequate funding! I am not advocating a ton of spending on gov't agencies, but there are certain agencies it will cost more for everyone in the long run if they are cut to the bone trying to save a few pennies in the big picture.

[Stacey Tarzan Phillips]

12:55 PM on 01/01/2012

this judge was screwed over by the "regulators" that are supposed to level the feild. The banksters that have ruined our economy are a cancer on the planet and the people. We the people have risin up to fight injustice and usary.we shall prevail over the greed and corruption. They cannot win their rigged game if we refuse to partisapate or just start a new game. The corrupt fear us we are legion we run this we will not forgive we do not forget expect us.Operaition Heroshima is operaitional and the end of a corrupt system is inevitable..

'

[abbadabba]

12:14 PM on 01/01/2012

So the SEC and Citi are juking a judge? Idiots. Is it not apparent that the SEC is trying to aid Citi in avoiding liability? Jeesh, what a bunch of organized crooks.

Why call the judge 'controversial" in your ever shifting ledes? He attempts to uphold the law rather than provide an escape hatch for Captain Morgan as is more typical of the SEC?

Republicans will use this to justify stripping the SEC of funds and powers.

The SEC staff should have a lifetime prohibition of going to work on WS.