NEW YORK, June 4 A U.S. appeals court on
Wednesday said a federal judge abused his discretion by
rejecting a $285 million fraud settlement between Citigroup Inc
and the U.S. Securities and Exchange Commission.
The 2nd U.S. Circuit Court of Appeals in New York said U.S.
District Judge Jed Rakoff was wrong to require the SEC to
establish the "truth" of its allegations as a condition of
approving the settlement.
The decision came in a case that became a flashpoint in a
debate over the SEC longtime policy of letting some corporate
defendants settle without admitting or denying its charges.
Citigroup's settlement was meant to resolve claims that the
bank misled investors in 2007 about a $1 billion collateralized
debt obligation, Class V Funding III, and simultaneously bet
against the debt as the U.S. housing market began to falter.
Rakoff in November 2011 rejected the accord as neither fair,
nor adequate nor in the public interest, saying the "neither
admit nor deny" policy left him no facts on which to judge the
(Reporting by Nate Raymond and Jonathan Stempel in New York;
Editing by Lisa Von Ahn)