When Citigroup agreed to a $285 million settlement with the Securities and Exchange Commission (SEC) to resolve allegations of negligence in investing that ultimately cost investors millions, the lender was allowed to do so without admitting or denying fault. That’s a problem, according to federal judge Jed Rakoff, who has denied the settlement and set a trial date of July 16, 2012 to resolve the issue once and for all[1]. Saying that the settlement is nothing more than a “mild and modest cost of doing business” and that the real facts of the matter should be examined and exposed, Rakoff denied the settlement “regretfully,” saying that “the proposed Consent Judgment is neither fair, nor reasonable, nor adequate, nor in the public interest.”
The SEC has proposed similar settlements with Bank of America, JPMorgan Chase, UBS and others. Rakoff’s denial of the settlement has the potential to dramatically undermine SEC enforcement efforts by making the option of not admitting to wrongdoing and coughing up hefty sums less of an option[2]. The SEC is protesting that it does not have the funds to combat Wall Street firms in court and argues that firms will “rarely admit wrongdoing…because that can be used against them in investor lawsuits.”
According to the SEC, Citigroup sold a $1 billion mortgage fund with weak mortgage securities that were likely to fail to investors in 2007. Citigroup told investors an independent party was choosing the portfolio investments. When the value of the portfolio declined, the lender, which had bet against the investors, made $160 million while investors lost $700 million. Rakoff complains that Citigroup is a “repeat offender” because it has habitually settled SEC fraud cases by neither admitting nor denying guilt and coughing up large sums that Rakoff considers nothing more than “the cost of doing business” for the firm. He also has said that Citigroup can afford these settlements, in part, because the SEC does not adequately monitor compliance and tends to fail to bring contempt charges in the case of repeat violations.
Do you think that Citigroup should be allowed to settle with the SEC? Should any lender be permitted to “walk” without admitting or denying wrongdoing?
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[1] http://www.dsnews.com/articles/new-york-judge-denies-citigroup-settlement-2011-11-28
[2] http://www.nytimes.com/2011/11/29/business/judge-rejects-sec-accord-with-citi.html?_r=1
It’s about time the legal system stands up to these big banks and it’s time to regulate banks and wall street once again before they bought the rights from our governemnt to tear down the regulations that were in place from the 1930′s SCAM. Also it’s time the people of the United States stand up and put term limits to ALL Elected officeals Federal or State plus term limits to all that are appointed to office. Right now I don’t see a United States do to the lack of consern from the people to few of them are making noise it needs to be like they are doing overseas all protest and rid our selfs of these corrupt government.
I am in agreement with Mike, but as we all know, this is simply “business as usual” in Washington D.C. and Wall Street. It will take an act of GOD to stop these crooks. The American people need to take a strong stand and stop doing business with these corrupt organizations.
Should Citi be allowed to settle? No!
Should any lender be allowed to “Walk”? No!
ANd what about the rating agencies that gave their stamp of approval?
AAA my A$$.
Stop doing business with big banks. Period.
I agree with Mike also.
Should Citigroup be held responsible WELL YES!!
Settle NO!!!
I had a mortgage with a bank in the 80′s and that bank sold my mortgage to then Citicorp long story I had my credit union buy back that mortgage and I stay with my credit union for everything Citi anything is bad news get rid of it be it a credit card mortgage what ever.