Judge Rakoff Rebuffed In Second Circuit Ruling
June 10, 2014
A three-judge Second Circuit panel reversed and remanded Judge Jed S. Rakoff’s order rejecting a settlement between the SEC and Citbank. The bank was accused of being party to the selection of subprime mortgage backed securities that were the shank of an investment fund, then taking a short position and reaping $160 profit when they assets tanked, while investors lost millions. The settlement included disgorgement of the $160 million, $30 million in prejudgment interest, $95 million in civil penalties, injunctive relief, remedial action and no admission of guilt or liability. Judge Rakoff said there was no reliable factual basis to determine if the settlement was adequate and fair, and there should be a trial to see if one existed. Robins, Kaplan, Miller & Ciresi attorney Stacey P. Slaughter, in her post on the case, calls it a victory for Wall Street but also points out that Judge Rakoff’s position is considered by many to have been influential in promoting public debate and influencing enforcement.
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