http://www.washingtonpost.com/national/judge-in-ny-strikes-down-285-million-citigroup-settlement-with-sec-over-mortgage-investment/2011/11/28/gIQAVtqD5N_story.html?wpisrc=al_comboNE_bNEW YORK — A federal judge on Monday struck down a $285 million settlement that Citigroup reached with the Securities and Exchange Commission, saying he couldn’t tell whether the deal was fair and criticizing regulators for shielding the public from the details of what the firm did wrong.
U.S. District Judge Jed Rakoff said the public has a right to know what happens in cases that touch on “the transparency of financial markets whose gyrations have so depressed our economy and debilitated our lives.” In such cases, the SEC has a responsibility to ensure that the truth emerges, he wrote.
Rakoff said he had spent hours trying to assess the settlement but concluded that he had not been given “any proven or admitted facts upon which to exercise even a modest degree of independent judgment.” He called the settlement “neither fair, nor reasonable, nor adequate, nor in the public interest.”
The SEC had accused the bank of betting against a complex mortgage investment in 2007 — making $160 million in the process — while investors lost millions. The settlement would have imposed penalties on Citigroup even as it allowed the company to deny allegations that it misled investors.
The SEC allowed the consent judgment settling the case to be filed the same day it filed its lawsuit against Citigroup, the judge noted.
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