Judge mickle displeased with the SEC

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Judge Roy Bean
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Re: Judge mickle displeased with the SEC

Postby Judge Roy Bean » Fri Oct 28, 2011 6:12 pm

Not sure who "mickle" is but just in case the story/blog goes away, here's the text of Judge Rakoff's (SDNY) order in 11 civ. 7387 (JSR) - UNITED STATES SECURITIES AND EXCHANGE COMMISSION v. CITIGROUP GLOBAL MARKETS INC.:

Pending before the Court is the proposed Final Judgment on consent in the above captioned case. The Court is required to ascertain whether the proposed judgment is fair, reasonable, adequate, and in the public interest. The Court will convene a hearing on November 9, 2011 at 3:00 pm to assist in this determination. Among the questions (without limitation) that the Court will want answered at this hearing are the following:

1) Why should the Court impose a judgment in a case in which the S.E.C. alleges a serious securities fraud but the defendant neither admits nor denies wrongdoing?

2) Given the S.E.C.’s statutory mandate to ensure transparency in the financial marketplace, is there an overriding public interest in determining whether the S.E.C.’s charges are true? Is the interest even stronger when there is no parallel criminal case?

3) What was the total loss to the victims as a result of Citigroup’s actions? How was this determined? lf, as the S.E.C.’s submission states, the loss was “at least” $160 million, what was it at most?

4) How was the amount of the proposed judgment determined? In particular, what calculations went into the determination of the $95 million penalty? Why, for example, is the penalty in this case less than one-fifth of the $535 million penalty assessed in SEC v. Goldman Sachs? What reason is there to believe this proposed penalty will have a meaningful deterrent effect?

5) The S.E.C.’s submission states that the S.E.C. has “identified… nine factors relevant to the assessment of whether to impose penalties against a corporation and, if so, in what amount.” But the submission fails to particularize how the factors were applied in this case. Did the S.E.C. employ these factors in this case? If so, how should this case be analyzed under each of those nine factors?

6) The proposed judgment imposes injunctive relief against future violations. What does the S.E.C. do to maintain compliance? How many contempt proceedings against large financial entitities has the S.E.C. brought in the past decade as a result of violations of prior consent judgments?

7) Why is the penalty in this case to be paid in large part by Citigroup and its shareholders rather than by the “culpable individual offenders acting for the corporation?” If the S.E.C. was for the most part unable to identify such alleged offenders, why was this?

8) What specific “control weaknesses” led to the acts alleged in the Complaint? How will the proposed “remedial undertakings” ensure that those acts do not occur again?

9) How can a securities fraud of this nature and magnitude be the result simply of negligence?

The parties should be prepared to answer these questions in detail at the November 9 hearing. In addition, the parties are permitted, but not required, to file with the Court written answers to these questions in advance of the hearing, provided such submissions are filed no later than noon on November 7, 2011.

SO ORDERED.


Something tells me " ... 'cause that's the way we've always done it ..." ain't gonna cut it for numbers 1), 4), 5) and 7) and I can't wait to see the answers.

I have my own, snarky proposed responses but, well ... never mind. :P
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Re: Judge mickle displeased with the SEC

Postby webhick » Fri Oct 28, 2011 6:23 pm

Judge Roy Bean wrote:Something tells me " ... 'cause that's the way we've always done it ..." ain't gonna cut it for numbers 1), 4), 5) and 7) and I can't wait to see the answers.

I have my own, snarky proposed responses but, well ... never mind. :P


Dial up the snark and have at it!
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Re: Judge mickle displeased with the SEC

Postby Judge Roy Bean » Fri Oct 28, 2011 7:15 pm

OK ... but you were warned:

1) Why should the Court impose a judgment in a case in which the S.E.C. alleges a serious securities fraud but the defendant neither admits nor denies wrongdoing?

Duh! If they deny, they commit perjury; if they admit, all kinds of bad things happen. Besides, they wouldn't agree to pay anything if that was part of the deal.

2) Given the S.E.C.’s statutory mandate to ensure transparency in the financial marketplace, is there an overriding public interest in determining whether the S.E.C.’s charges are true? Is the interest even stronger when there is no parallel criminal case?

a: No. You just have to take our word for it. (See also answer to 1, above.)
b: No. The public should mind their own business. Criminal cases are hard, messy and really screw up these guys' lives. Trust us, this is the best outcome for everyone.

3) What was the total loss to the victims as a result of Citigroup’s actions? How was this determined? lf, as the S.E.C.’s submission states, the loss was “at least” $160 million, what was it at most?

a: Damned if we know.
b: That's what they told us.
c: Damned if we know.

4) How was the amount of the proposed judgment determined? In particular, what calculations went into the determination of the $95 million penalty? Why, for example, is the penalty in this case less than one-fifth of the $535 million penalty assessed in SEC v. Goldman Sachs? What reason is there to believe this proposed penalty will have a meaningful deterrent effect?

a and b: They told us what they were willing to pay.
c: Better lawyers?
d: They promised.

5) The S.E.C.’s submission states that the S.E.C. has “identified… nine factors relevant to the assessment of whether to impose penalties against a corporation and, if so, in what amount.” But the submission fails to particularize how the factors were applied in this case. Did the S.E.C. employ these factors in this case? If so, how should this case be analyzed under each of those nine factors?

a: Yes, we did.
b: Those factors are secret. Just take our word for it and we'll all get out of here before lunch.

6) The proposed judgment imposes injunctive relief against future violations. What does the S.E.C. do to maintain compliance? How many contempt proceedings against large financial entitities has the S.E.C. brought in the past decade as a result of violations of prior consent judgments?

a: Just what we've always done.
b: We haven't needed to. (See also 4.d:, above.)

7) Why is the penalty in this case to be paid in large part by Citigroup and its shareholders rather than by the “culpable individual offenders acting for the corporation?” If the S.E.C. was for the most part unable to identify such alleged offenders, why was this?

a: Because the "culpable" individual offenders are well-connected and have good attorneys. Criminal prosecutions are a pain in the ass. (See also 2.b:, above.)
b: Oh, we identified them.

8) What specific “control weaknesses” led to the acts alleged in the Complaint? How will the proposed “remedial undertakings” ensure that those acts do not occur again?

a: It's called getting as much as you can while you can.
b: They promised.

9) How can a securities fraud of this nature and magnitude be the result simply of negligence?

Because if it weren't as a result of negligence, we'd have to prosecute some of these people. (See 2.b:, above.)
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Re: Judge mickle displeased with the SEC

Postby Judge Roy Bean » Thu Nov 10, 2011 6:04 pm

Update:

Federal Judge Roasts SEC for Supine Citigroup Settlement

http://www.courthousenews.com/2011/11/10/41354.htm
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Re: Judge mickle displeased with the SEC

Postby Judge Roy Bean » Tue Nov 29, 2011 5:50 am

Behind door number three ... it's officer O'Malley! You're busted!

http://www.latimes.com/business/la-fi-1129-citigroup-sec-20111129,0,4917449.story?track=rss

By Nathaniel Popper, Los Angeles Times

November 29, 2011
Reporting from New York—

A federal judge in New York issued a stern challenge to the government's recent history of imposing "relatively modest" punishments on big Wall Street banks for wrongdoing during the financial crisis.

Jed Rakoff, a federal judge in Manhattan, issued a sharply worded order Monday rejecting a proposed $285-million settlement between the Securities and Exchange Commission and Citigroup Inc. that would have allowed the bank to avoid admitting it defrauded investors over toxic mortgage securities. He said that other similar settlements had not stopped banks from breaking the law, and added that the fines are "pocket change to any entity as large as Citigroup.


:P
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Re: Judge mickle displeased with the SEC

Postby Cathulhu » Tue Nov 29, 2011 12:55 pm

Judge Roy Bean wrote:Behind door number three ... it's officer O'Malley! You're busted!



Cheech and Chong references?
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Re: Judge mickle displeased with the SEC

Postby JamesVincent » Tue Nov 29, 2011 2:59 pm

Cathulhu wrote:
Judge Roy Bean wrote:Behind door number three ... it's officer O'Malley! You're busted!



Cheech and Chong references?


I thought O'Malley was Police Academy?
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