U.S. District Court Judge Jed Rakoff is stepping up his fight with the Securities and Exchange Commission over its regulation of Wall Street. After accusing the regulator of negotiating a weak settlement with Citigroup, Rakoff said the SEC withheld important information that prevented him from doing his job.
The SEC isn’t taking Rakoff's attacks sitting down:
Meanwhile, the SEC took the dramatic step of asking the U.S. Court of Appeals for the 2nd Circuit to overrule a recent Rakoff decision by issuing a special writ generally reserved for cases in which a judge has grossly overstepped his bounds. Called a writ of mandamus, such a direct and personal challenge to a judge is far from a routine gambit.
The judge and the SEC are locked in an extraordinary battle over how the government should police financial fraud, and just when it seemed that the conflict could not get more contentious, Thursday’s development added a dimension.
Rakoff, who presides over major Wall Street cases from his bench in Manhattan, has been pushing the SEC to stop negotiating settlements in which firms accused of securities fraud neither admit nor deny wrongdoing. In a recent case involving a Citigroup mortgage deal in which investors allegedly lost more than $700 million, he rejected a settlement under which Citigroup would pay $285 million, saying it was “neither fair, nor reasonable, nor adequate, nor in the public interest.”
Companies can look upon such settlements as “a cost of doing business,” he wrote.
A spokesman for the SEC issued a statement saying that the agency “will respond as appropriate in the proceedings before the Court of Appeals.”
[Via The Washington Post]