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Judge Rejects Citigroup, SEC Settlement
Originally published on Tue November 29, 2011 12:16 pm
RENEE MONTAGNE, HOST:
In New York, yesterday, a federal judge rejected a settlement of a fraud case involving Citigroup. The Securities and Exchange Commission, which brought charges against the bank, had agreed to the $285 million deal. But Judge Jed Rakoff said he didn't believe the settlement was in the public interest. NPR's Jim Zarroli reports.
JIM ZARROLI, BYLINE: The SEC says Citigroup sold mortgage-backed securities to investors without telling them that some of the underlying assets were of questionable value. Judge Rakoff noted that if the allegations are true, they represent a substantial fraud by the company, but he said it was impossible to tell whether there was anything to the charges because there had been no trial. Instead, the SEC had agreed to settle the case and Citigroup had been allowed to accept the deal without acknowledging wrongdoing.
Such settlements are common at the SEC, but the judge said, because Citigroup continues to insist it did not commit fraud the facts of the case are unclear, and so, he said, it's impossible for him to say whether the settlement is fair. And he ordered the case to go to trial next July.
The SEC responded with a statement defending the settlement. It said, forcing Citigroup to admit wrongdoing would have forced the case to trial and wasted time and resources. Meanwhile, Citigroup said the settlement fully complies with long-established legal standards. Jim Zarroli, NPR News, New York. Transcript provided by NPR, Copyright NPR.