Rakoff to the Rescue: Judge Tosses Citigroup Settlement
“The SEC runs a revolving door of crony capitalism where attorneys and enforcement officers come and go exchanging positions with Wall Street and the large banks as frequently as you and I change our underwear.”
Last month we told you about a federal judge pulling a not-so-fast on the Security Exchange Commission and demanding a closer look at a $285 settlement with Citigroup that Roy Oppenheim called a ‘get out jail free card’ for the banking giant.
Well ladies and gentlemen this week Judge Jed Rakoff has stuck up for the homeowner once again and struck down the settlement, which would have allowed Citigroup to skate without having to admit any wrongdoing in a 2007 toxic mortgage deal.
In his written decision the judge said he spent hours going over the settlement, and ultimately concluded it was “neither fair, nor reasonable, nor adequate, nor in the public interest.”
Florida foreclosure attorney Roy Oppenheim has been calling shenanigans on this settlement ever since it was first announced, and now we’re glad to see Judge Rackoff stand up and take action against the bank. He had previously called this settlement a ‘sweetheart deal’, and he was absolutely right. As Oppenheim has said on far too many occasions, there can be no changes to the banking industry without accountability, and Judge Rakoff has finally demanded it.
He also held the SEC to task yet again for their failure to hold the banks up to scrutiny and by failing to assess blame. By allowing these financial institutions to enter into these settlements without addressing the charges against them Rakoff added that the SEC “deprives the court of even the most minimal assurance that the substantial injunctive relief it is being asked to impose has any basis in fact.”
And while SEC Chairman Mary Schapiro may have disagreed with the judge’s ruling, she already has taken some action that could levy greater financial penalty against the banks, asking Congress to expand the agency’s authority to fine companies and individuals.
Schapiro also wants, among other proposed changes, to raise the limits on fines they can impose on the banks, saying such changes would “further enhance the effectiveness of the (SEC’s) enforcement program,” in a letter she wrote Monday to Sen. Jack Reed, D-R.I., who heads the Senate Banking subcommittee on securities.
However it seems the SEC, despite the judge’s harsh words, still fails to see the light. In his rebuttal statement, SEC enforcement director Robert Khuzami said he thought Rakoff was too focused on the need to have Citigroup admit guilt, that the financial penalties imposed softened the blow of not having an admission if “that relief is obtained promptly and without the risks, delay and resources required at trial.”
We couldn’t disagree more.
“In reality, it is a well known secret that the SEC runs a revolving door and is the epicenter of crony capitalism where attorneys and enforcement officers come and go exchanging positions with Wall Street and the large banks as frequently as you and I change our underwear. It’s that plain and simple,” said Oppenheim.
Judge Rakoff thankfully, does see the importance of that admission to the overall mission of the SEC, which needs to refocus on the needs of the consumer rather than the institutions, concluding his statement by saying:
“In much of the world, propaganda reigns, and truth is confined to secretive, fearful whispers,” Rakoff said.. But the SEC, of all agencies, has a duty, inherent in its statutory mission, to see that the truth emerges.”