One of the most telling facets of the Securities and Exchange Commission’s dashed settlement with Citigroup, is it’s argument that the “public interest” shouldn’t be part of any judicial review.
The SEC accused Citigroup of fraud and then proposed allowing Citigroup to settle the allegation for $285 million without admitting nor denying guilt. This, of course, is standard operating procedure for the SEC, but a Federal Judge in New York nixed the settlement anyway.
Too many companies have slipped away from meaningful enforcement, allegedly committing frauds and considering the fines a cost of doing business. Judge Jed Rakoff insisted the public has a right to know the truth: Did Citigroup commit fraud or not?
The SEC, however, had the temerity to argue it’s none of the public’s business.
Never mind all the bailout money Citigroup received when it blew itself and the U.S. economy to smithereens. “The public interest … is not part of [the] applicable standard of judicial review,” the SEC argued. In other words, there’s no need for the court to check to see whether the public interest has been served. Just sign the papers, your honor, and move on to the next thing.
Judge Rakoff wisely ruled otherwise:
“When a public agency asks a court to become its partner in enforcement by imposing wide-ranging injunctive remedies on a defendant, enforced by the formidable judicial power of contempt, the court, and the public, need some knowledge of what the underlying facts are: for otherwise, the court becomes a mere handmaiden to a settlement privately negotiated on the basis of unknown facts, while the public is deprived of ever knowing the truth in a matter of obvious public importance.”
So who does the SEC agency represent? The public or the companies it is supposed to regulate?
Click here to read Judge Rakoff’s decision. And click here to read a column I wrote on the case a couple weeks ago.
