By Cydney Posner

According to this BusinessWeek article, Judge Rakoff questioned whether the $285M settlement was really in the public interest. Below are some quotes from the article that should give you a flavor of the hearing:

Judge Rakoff "spent much of an hour-long hearing today asking both sides why he should approve an accord that doesn't require Citigroup to admit any wrongdoing.

" ‘Why does that make any sense in this context?' Rakoff asked Matthew Martens, the SEC's chief litigation counsel, in the hearing in Manhattan federal court today." In addition, the article contends that the judge was "critical of the SEC's arguments that he isn't required to consider the public interest in considering the settlement.

"'It's an interesting position,' Rakoff told Martens. ‘I'm supposed to exercise my power, but not my judgment.'

"Rakoff didn't say when he'll rule on the joint request to approve the settlement….Rakoff also asked why he should endorse a provision barring Citigroup from violating securities laws in the future, when the SEC hasn't filed civil contempt proceedings against a major financial institution, including Citigroup, for violating such a provision in at least the last 10 years.

"'Why do you ask for an injunction when you never use it?' Rakoff asked Martens…."

The judge also a lawyer for Citigroup "if the bank admits it did what the SEC claims in the complaint.

"'We do not admit the allegations,' [he responded], to laughter in the standing-room-only courtroom. ‘But if it's any consolation, we don't deny them.' "

"….Rakoff asked Martens whether the public interest isn't better served by trying the agency's claims in court to determine whether they are true.

"Martens said the SEC complaint in the case included detailed allegations of Citigroup's conduct in promoting the CDOs. He said Citigroup's violation of federal securities laws, in the face of earlier agreements requiring compliance with the law, was a factor the SEC used to determine the amount of the latest settlements.

" ‘I don't believe their failure to admit the allegations leaves the public wondering what occurred here,' Martens told Rakoff.

"Martens also told Rakoff that the settlement serves the public interest and that it permits the SEC to use its limited resources to pursue other securities violators.

"In response to another of Rakoff's questions, Martens said the SEC estimates that Citigroup gained from $160 million to $190 million from the CDOs at issue in the case. Investors lost more than $700 million, he said."

This content is provided for general informational purposes only, and your access or use of the content does not create an attorney-client relationship between you or your organization and Cooley LLP, Cooley (UK) LLP, or any other affiliated practice or entity (collectively referred to as "Cooley"). By accessing this content, you agree that the information provided does not constitute legal or other professional advice. This content is not a substitute for obtaining legal advice from a qualified attorney licensed in your jurisdiction, and you should not act or refrain from acting based on this content. This content may be changed without notice. It is not guaranteed to be complete, correct or up to date, and it may not reflect the most current legal developments. Prior results do not guarantee a similar outcome. Do not send any confidential information to Cooley, as we do not have any duty to keep any information you provide to us confidential. When advising companies, our attorney-client relationship is with the company, not with any individual. This content may have been generated with the assistance of artificial intelligence (Al) in accordance with our Al Principles, may be considered Attorney Advertising and is subject to our legal notices.