Judge Rakoff issues words of caution after begrudgingly approving Citigroup settlement with SEC

Judge Jed Rakoff said in his opinion, “They [the Court of Appeals] who must be obeyed have spoken, and this Court's duty is to faithfully fulfill their mandate.”

A federal judge in New York, who just three years ago rejected a $285 million fraud settlement between Citigroup and the Securities and Exchange Commission (SEC), now has followed the will of the 2nd Circuit Court of Appeals and approved the proposal.

The decision to approve the settlement by U.S. District Court Judge Jed Rakoff was supported by the SEC and appears to put the case to rest.

He had earlier rejected a proposed consent judgment on the case because parties “failed to provide the court with sufficient evidence to enable it to assess whether the agreement was fair, adequate, reasonable, and in the public interest,” Rakoff said in his ruling. But the Court of Appeals responded that this standard was mistaken and/or misapplied.

Among the 2nd Circuit’s key reasons for rejecting Rakoff’s earlier decision is that the "primary focus of the [district court's] inquiry … should be on ensuring the consent decree is procedurally proper ... taking care not to infringe on the SEC's discretionary authority to settle on a particular set of terms."

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Ed Silverstein

Ed Silverstein is a veteran writer and editor for magazines, websites and newspapers. A graduate of Harvard's Kennedy School of Government, he has won several...

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