More documentation of the extraordinary corruption of our regulators. When they’re not watching porn, the thugs at the SEC work on designing settlements favorable for the criminals.
It RARELY happens that a JUDGE refuses to accept a settlement and this just goes to show how horrible this settlement really is.
By Zachary A. Goldfarb
Tuesday, August 17, 2010
A federal judge refused on Monday to accept a $75 million settlement between the Securities and Exchange Commission and Citigroup, marking the second time this year that a judge has questioned whether the agency had exacted the proper sanction from a major bank.
During a hearing on the settlement, Judge Ellen S. Huvelle of the U.S. District Court for the District of Columbia raised questions about the SEC’s investigation into Citigroup, and how it decided on the size of the penalty and on the individual executives who also face sanctions, according to lawyers who were present. She asked why company shareholders must ultimately bear the price of the sanction, and why the agency charged only two executives with wrongdoing when more senior executives were involved.
Huvelle demanded additional information from the SEC and Citigroup, ordering the parties to file briefs and scheduling a hearing for late September. Through spokesmen, the SEC and Citigroup said they would provide the judge with all the requested information.
The judge’s action is the latest setback for the agency as it tries to show it can hold major Wall Street firms and their executives accountable for actions that might have fueled the financial crisis.
Last year, a federal judge in New York pilloried the SEC over its settlement with Bank of America of charges that the bank did not disclose mounting losses and plans to pay billions of dollars in bonuses to employees.
In rejecting the SEC’s initial $33 million Bank of America settlement, U.S. District Judge Jed S. Rakoff of the Southern District of New York was incredulous about the agreement. He said it suggested “a rather cynical relationship between the parties” in which the SEC would get to say it was penalizing a big bank and Bank of America could avoid a protracted fight with one of its regulators.
Ultimately, after the SEC quintupled the fine and added new charges, Rakoff offered his half-hearted approval to the settlement.
Last month, the SEC charged Citigroup with misleading investors about nearly $40 billion of subprime mortgage investments in its portfolio in 2007. Those investments blew a gaping hole in the bank’s balance sheet and led the federal government to provide tens of billions of dollars in financial aid to keep the bank afloat.
The SEC also charged former Citigroup chief financial officer Gary L. Crittenden and former investor relations head Arthur Tildesley for their alleged roles in the wrongdoing.
Crittenden agreed to pay $100,000 and Tildesley agreed to pay $80,000 to settle the charges. Under the settlement, Citigroup and the former executives neither admitted nor denied wrongdoing.
An SEC lawyer told the judge on Monday that the agency did an expansive investigation into Citigroup and could only find evidence of wrongdoing by those two executives. The lawyer told the judge that the agency did an economic analysis of the bank’s alleged wrongdoing, trying to determine what gain the company enjoyed as a result of the faulty disclosures, and came up with what it considered a reasonable penalty.
Matthew Miller, a lawyer at Cuneo, Gilbert and Laduca who is representing a shareholder who has sued Citigroup executives over losses incurred by the firm, praised the judge’s action.
“There’s very little explanation as to why these two individuals who are named in a related administrative complaint are the only two people responsible for the conduct at issue, and why there are no more senior executives involved in this proceeding,” he said.
If YOU owe Citi any unsecured debt and you are (near) judgment-proof, vote with your money.
Don’t pay these criminals.
If you feel bad about not keeping your word to pay them back, consider the MILLIONS whose lives have been ruined and give some of the money you would have given to Citi to people who DESERVE it.
Play Robin Hood and create a little JUSTICE.