I haven’t seen a lot of commendable decision-making over the last few years, but a recent decision of U.S. District Judge Jed Rakoff gives me hope that all is not lost. As reported in The Wall Street Journal yesterday (Nov. 29, “Citi Ruling Could Chill SEC, Street Legal Pacts,” C1), Judge Rakoff rejected the $285 million settlement between Citigroup and the SEC over fraud charges surrounding Citi’s undisclosed bet against the assets in its own mortgage-bond deal. What the judge seemed to find most displeasing is the language of the settlement saying Citi “neither admits nor denies wrongdoing.” It boggles the mind to think that a firm will fork over $285 million dollars if it didn’t do anything wrong, and that the SEC doesn’t see the problem with it. The judge seemed to think the same thing, saying that a settlement like this is “neither fair, nor reasonable, nor adequate, nor in the public interest.” By the way, he also thought the $95 million penalty within the settlement was ridiculously low. I love this guy!
We’ll see what comes of this, perhaps not much, but I support anything that brings more transparency to the events of the last several years and requires those responsible to admit their role in it all. I hope Judge Rakoff’s decision moves things in the direction of bringing about responsible, fair, and adequate settlements that add transparency to all that has happened. And, when people learn more about what these firms have done, maybe they’ll begin to vote with their feet and checkbooks and take their business elsewhere as I did earlier this year when I dusted Bank of America off the bottom of my family’s and my firm’s shoes and gave my business to a firm I can trust and respect.
In the meantime, cheers for Judge Rakoff! And boos for Citigroup and the SEC.