As a former SEC attorney myself, I know how difficult it can be to work with limited staff, time, and money to reign in the fraud and deceit that seems to run rampant in Gotham… Excuse me, I meant Wall Street. But resources aside, some cases demand a full court press.
The bloggers are a blogging and twitter is atwitter with talk of Judge Rakoff’s refusal to approve a proposed settlement between the SEC and Citigroup for “alleged” fraud. Specifically, Citigroup is accused of selling junk securities to investors only so it could turn around and short, or bet against, its own customers when the securities tanked. According to the New York Times, investors lost $700 million while Citigroup made $160 million from the deal. This is not just aggressive business-as-usual but the kind of fraud you’d expect from some boiler room shop manned by ex-cons. It’s surely not something you’d expect from one of our nation’s largest banks. (Who, by the way, survived only after receiving $30 billion from you and me – taxpayers, that is.)
Rakoff’s decision is hailed by some as a triumph of reason over “business as usual,” but derided by others as capricious overreaching by a judge who should defer to an agency’s discretion to settle such matters. I’m firmly with Judge Rakoff on these facts. It was the right case to make a statement.
Business as usual has to change. Companies like Citigroup should not be allowed to simply sweep improper conduct under the rug with no admission of guilt and a penalty that Judge Rakoff appropriately described as pocket change. As I pointed out in this interview, somebody must be held responsible. Somewhere on Wall Street sit a couple of bankers who decided it would be a smart idea to bet against their customers and worse, to sabotage their customers’ investments. Those people must be held accountable and the company they work for should admit wrongdoing. Who are they? In this case, taxpayers are entitled to know.
On the other hand, agencies like the SEC do not have unlimited resources. As a former SEC attorney myself, I know how difficult it can be to work with limited staff, time, and money to reign in the fraud and deceit that seems to run rampant in Gotham… Excuse me, I meant Wall Street. But resources aside, some cases demand a full court press. This is one that shocks the conscience.
Judge Rakoff was correct that Citigroup is a recidivist and repeat offender and I look forward to watching the effects of this potential “new era” trickle out to the rest of Wall Street. There is a new sheriff in town and his name is Jed Rakoff. Will he enlist others?
Assisted by Zachary A. Kady