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Last week we found out that Judge Jed Rakoff ruled that Citigroup’s $285 million settlement with the SEC over the bank’s misleading subprime mortgage CDOs was too low.Now his decision is in, and instead of allowing the parties to try to renegotiate the settlement (as many expected), he’s told them to prepare for a trial on July 16th, 2012, according to Bloomberg.
This is unusual, but not totally unexpected.
Legal experts who analysed Judge Rakoff’s ruling said that he has shown disdain for a common SEC practice dating back to the 1970s — allowing banks to negotiate a settlement without confirming or denying guilt.
There are two reasons for it. It saves the SEC from looking weak by losing a case, and it saves the banks the bad press of a guilty admission or verdict.
Rakoff, in the past, has shown that he has no interest in keeping this practice alive. In a decisions for a similar case against Bank of America decision earlier this year he said (via Bloomberg):
“Here an agency of the U.S. is saying, in effect, ‘although we claim that these defendants have done terrible things, they refuse to admit it and we do not propose to prove it, but will simply resort to gagging their right to deny it,'” he wrote in a decision approving the settlement… “The SEC gets to claim that it is exposing wrongdoing on the part of the Bank of America in a high-profile merger. The bank’s management gets to claim that they have been coerced into an onerous settlement by overzealous regulators. And all this is done at the expense not only of the shareholders, but also of the truth.”