Although talking tough, in the end the rant by the Court is just that: a rant.
Last year it was Judge Rakoff’s refusal to accept a proposed settlement between Merrill Lynch, soon to be Bank of America and the SEC. He almost made the parties go to trial but in the end accepted some modest changes to the settlement and let the parties move forward with a deal that was dubious at best and arguably contrary to the best interests of shareholders. The Judge was hardly throwing real punches, just shadow boxing. Well he’s at it again.
He’s in the ring once again with the SEC. And yet again, he is being asked to approve a settlement between the Commission and this time, three executives of a semiconductor company, who according to the SEC had been cooking the books of the company for "a decade". Although spiced with cutting rhetoric aimed at the Commission’s practice of allowing bad guys to get off the hook "without admitting or denying wrongdoing," he approves the settlement.
The Judge’s feigned opprobrium is merely dicta. Every lawyer learns the concept in the first days of law school. It’s Latin, generally meaning a discussion or language in a judicial opinion that may hint at the court’s reasoning, but in the end is unrelated to the court’s holding or decision. Judge Rakoff’s pronouncements in the case are just that—dicta. Eloquent to be sure, worldly and learned, you bet. Check this sentence out:
"The result is a stew of confusion and hypocrisy unworthy of such a proud agency as the S.E.C."
But in the end, all those words don’t amount to a "hill of beans" because the "holding" in the case—the headline—is, "Federal Judge Approves Settlement" despite the Commission allowing the bad guys to get away without admitting any wrongful conduct. Although talking tough, in the end the rant by the Court is just that: a rant.
Could it be argued that the next settlement brought before the Judge by the SEC using the language "without admitting or denying wrongdoing" will be rejected? Perhaps, but don’t count on it.