Citigroup got caught defrauding investors out of $700 million dollars? The penalty? The SEC wants to charge the company $285 million dollars. That leaves them with a profit of $415 million for committing fraud. Not a bad deal … unless you’re the judge presiding over the case.
From the New York Times:
Taking a broad swipe at the Securities and Exchange Commission’s practice of allowing companies to settle cases without admitting that they had done anything wrong, a federal judge on Monday rejected a $285 million settlement between Citigroup and the agency.
The judge, Jed S. Rakoff of United States District Court in Manhattan, said that he could not determine whether the agency’s settlement with Citigroup was “fair, reasonable, adequate and in the public interest,” as required by law, because the agency had claimed, but had not proved, that Citigroup committed fraud.
…
The agency contends that it must settle most of the cases it brings because it does not have the money or the staff to battle deep-pocketed Wall Street firms in court. Wall Street firms will rarely admit wrongdoing, the agency says, because that can be used against them in investor lawsuits.
The agency in particular, Judge Rakoff argued, “has a duty, inherent in its statutory mission, to see that the truth emerges.” But it is difficult to tell what the agency is getting from this settlement “other than a quick headline.” Even a $285 million settlement, he said, “is pocket change to any entity as large as Citigroup,” and often viewed by Wall Street firms “as a cost of doing business.”
Rather than let the bankers off with a slap on the wrist, the judge is insisting that the government actually prosecute criminality.
Matt Taibbi appeared on Countdown last night to discuss the ruling:
