SEC chided again by judge in Citigroup fraud case

Thu Dec 29, 2011 5:53pm EST

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(Reuters) - 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)

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Comments (2)
The SEC is even more toothless… with some lawyers making rash decisions that will let more culprits and criminals off with hand-slaps.

The American justice system is a travesty when people caught stealing small items go to jail, yet banksters and crooks in citigroup are let free with a fine.

How is it possible to prevent recurrence of criminal activity and fraud when the crooks win even when they lose (look at the pittance of a fine and there are no criminal charges or individual charges for the culprits responsible)

Dec 30, 2011 4:03pm EST  --  Report as abuse
fiigtree1 wrote:
if these criminals are allowed to continue to do business as usaual, they will have made the justice system even more of a sham and a farce.
if these villians are allowed to proceed in such a manner, they victims who have,are and will lose their homes dues to the banking practices and poor business practices. these victims will not have a way to adress their injuries, causes intentionally and purposefully by the banking system which we all seem to be yoked to.
these major banks were pulled out of disaster by our hard earned dollars, bailed out by the government our government. now the fedral regulators are giveng them slaps on the hands, and a wink.
people say the banks have paid the bail out monies back, however they fail to mention they paid it back, by charging us on our own monies in their banks,not to mention the other unscrupulous practices they have devised to fleece us and our futures.
the judge rakoff needs to be allowed to hold them accountable.
it does not take an educated person to see ther wrongs being perpetuated here.

Jan 04, 2012 1:58pm EST  --  Report as abuse
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