Arab Today, arab today us court rules citi settlement wrongly blocked
Last Updated : GMT 10:09:25
Arab Today, arab today
Arab Today, arab today

US court rules Citi settlement wrongly blocked

Arab Today, arab today

Arab Today, arab today US court rules Citi settlement wrongly blocked

Citibank branch at the Citigroup world headquarters on Park Avenue in New York City
New York - AFP

 A US federal appeals court Wednesday ruled that a lower court judge abused his discretion when he blocked a settlement between Citigroup and regulators over alleged mortgage-securities fraud.
The appeals court overturned a November 2011 decision by US District Judge Jed Rakoff refusing to approve a $285 million settlement of US allegations that Citigroup misrepresented its role in preparing mortgage-backed securities in which investors lost millions.
Rakoff had sharply criticized the Securities and Exchange Commission for agreeing to accept a small fine for the alleged wrongdoing that went to the heart of the 2008 financial crisis. In particular, he took issue with the settlement for not requiring Citi to admit or deny the allegations.
But the appeals court rejected Rakoff's conclusion, saying the SEC should be afforded "significant deference" in determining whether a deal serves the public interest. The SEC's decision to settle rests in part on the agency's allocation of its enforcement budget, the appeals court said.
The appeals court decision sent the case back to Rakoff, who has publicly criticized regulators for a meek response to Wall Street wrongdoing that led to the housing bust.
In the Citi case, Rakoff wrote that approving the deal would rubber-stamp an agreement that might not be in the public interest.
"In any case like this that touches on the transparency of financial markets whose gyrations have so depressed our lives, there is an overriding public interest in knowing the truth," he said. 
"The SEC, 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."
But the appeals court, in its decision Wednesday, said that Rakoff's conclusion requiring the SEC to determine the truth "constitutes legal error" and ordered him to determine whether the settlement serves the public interest.
"Trials are primarily about the truth," the court said. "Consent decrees are about pragmatism."
Andrew Ceresney, the SEC's enforcement director, applauded the ruling for "reaffirming the significant deference accorded to the SEC in determining whether to settle with parties and on what terms."
The ability to settle allows "regulatory agencies to serve the public interest by returning money to harmed investors more quickly, without the uncertainty and delay from litigation and without the need to expend additional agency resources."
A Citigroup spokeswoman declined comment. Rakoff's chambers said the judge would have no comment.

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