Citigroup’s $285 million settlement with the SEC has just landed in the lap of Judge Jed S. Rakoff, a Manhattan District Court judge known for being wary of the SEC and with a history of rejecting their deals.
The original charges the SEC brought again Citigroup concerned the bank allegedly misleading investors in a sale of $1 billion worth of risky home mortgage bonds in 2007. The settlement was announced last week.
All securities settlements must receive the approval of a judge, and many deals tend to breeze through the process. But in the last few years judges showing more reservation, becoming more inquisitive and critical of settlements before giving them the thumbs-up.
Among Judge Rakoff’s burning questions include inquiries on how the price of the settlement was decided, and why Citi did not have to admit wrongdoing despite the original lawsuit claiming the bank had committed a very serious case of fraud.
Judge Rakoff is also well known for his rejection of a $33 million settlement during the Bank of America takeover of Merrill Lynch. Eventually, he allowed the settlement through at $150 million, but called it “half-baked justice at best,” according to Reuters.
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