SEC Chided for Sweetheart Settlement Deal with Citigroup

Category:  BloggERy
Tuesday, November 29th, 2011 at 7:30 PM
SEC Chided for Sweetheart Settlement Deal with Citigroup by Jay Stevens
Josh Townsend

Maybe you saw, maybe you didn't, but New York federal judge Jed Rakoff threw out a settlement between the SEC and Citigroup in a ruling that makes a 99-percenter's heart trill. Here's why.

For starters, the way the SEC and Wall Street has done business for years is when a financial company was involved in fraud or other illegal activities, the SEC levies a fine against the company in return for not detailing the infractions and allowing the company not to admit to wrongdoing.

In short, such a deal essentially shields the Wall Street firm from civil litigation. That is, the poor suckers the firm swindled are left holding the bag. Matt Taibbi:

The Rakoff ruling shines a light on the way these crappy settlements have evolved into a kind of cheap payoff system, in which crimes may be committed over and over again, and the SEC’s only role is to take a bribe each time the offenders slip up and get caught.

If you never have to worry about serious punishments, or court findings of criminal guilt (which would leave you exposed to crippling lawsuits), then there’s simply no incentive to stop committing fraud. These SEC settlements simply become part of the cost of doing business...

But you've got to read the ruling itself. It's awesome. It's an indictment of Wall Street and the government agency that protects it. Rakoff calls Citigroup a "recidivist," calls the fine levied against them "pocket change," and notes that the settlement leaves the "defrauded investors substantially short-changed." But the judge's harshest words were saved for the settlement's suppressing of the facts of the case from the public -- and the SEC's argument that the "public interest" should have no bearing on the settlement:

Finally, in any case like this that touches on the transparency of financial markets whose gyrations have so depressed our economy and debilitated our lives, there is an overriding public interest in knowing the truth. In much of the world, propaganda reigns, and truth is confined to secretive, fearful whispers. Even in our nation, apologists for suppressing or obscuring the truth may always be found. But the S.E.C., of all agencies, has a duty, inherent in its statutory mission, to see that the truth emerges; and if it fails to do so, this Court must not, in the name of deference or convenience, grant judicial enforcement to the agency's contrivances.

These kinds of settlements have allowed Wall Street to cheat, steal, and lie to enrich itself at the expense of the rest of us -- and, recently, at the cost of the economy -- without any real repercussion. Hopefully, the Rakoff decision will force the SEC to bring to light the depradations of the industry, and open the industry to civil litigation for its wrongdoing.

Still, these kinds of settlements are just one of Wall Street's innumerable sweetheart deals with the government. And who are we kidding? Do you think the government and their Wall Street masters will let this ruling ruin the good thing they have together?

Erie Reader: Vol. 4, No. 25
Now Available — Pick It Up Today

CURRENT

Sony, Seth Rogan, and Kim Jong, Oh My! This may be better than fiction.

Sister Pat Lupo, OSB, joins the environmental protection committee for the Wolf Transition team. 

Arts and Culture Editor Alex Bieler picks out some of his favorite music videos that came to be in 2014.

Come down to East High School tonight at 6 p.m. to see what students are learning about music!

Here's a roundup of top news stories you might have missed from yesterday. Consider it an early Christmas present. 

IN THIS ISSUE

The Presque Isle Partnership is hosting Polar Fest on Sunday, Dec. 14, a winter version of Discover Presque Isle, if you will, featuring indoor and outdoor activities related to the winter season.

Music fans were in for a treat this past November when a long list of those loquacious lyricists showed off their musical chops at 814 Grinders: Hip-hop Pt. 1. The event was so good, in fact, that it will be getting a sequel Friday, Dec. 12 at The Beer Mug.

Wayward Tattoo Studio presents Arc Angels Toy Drive

PACA presents Every Christmas Story Ever Told (and then some!)

The Lake Erie Ballet will continue its holiday tradition this year with four productions of The Nutcracker at the Warner Theatre this December, including a pair of special events. 

Pittsburgh indie rockers return to Erie's Basement Transmissions.

The Station Dinner Theatre will celebrate its 25th Anniversary Holiday Musical event with Christmas Memories: A Christmas Carol

Martinis and blues go together just like peas and carrots. Confused? Read on.

Michigan-bred 'mericana badasses return to Erie Saturday, Dec. 19.

ECO showcases both new and old holiday music with its upcoming show.