Verdicts & Settlements

Another Judge Refuses to Accept SEC Deal, Says She Is ‘Baffled’ by Pact

A second judge has balked at a settlement between the Securities and Exchange Commission and a major bank.

This time the judge was Ellen Huvelle and the bank was Citigroup, accused of misleading investors about some $40 billion in subprime investments, according to the Washington Post, the Wall Street Journal (sub. req.) and Bloomberg. Huvelle, a federal judge in Washington, D.C., said she was “baffled” by the $75 million settlement and the court would not be a “rubber stamp,” according to the Wall Street Journal.

The proposed settlement also included a deal with two former Citigroup executives, former chief financial officer Gary Crittenden and former investor relations head Arthur Tildesley, who would pay $100,000 and $80,000 respectively without admitting wrongdoing, the stories say.

Huvelle asked how the SEC decided on the size of the penalty, why it accused only two executives, and why shareholders should ultimately have to pick up the cost. Parties will provide additional information in briefs to be filed in September.

“I look at this and say, ‘Why would I find this fair and reasonable?’ ‘” she said, according to the Wall Street Journal account. “You expect the court to rubber-stamp, but we can’t.”

Another federal judge, Jed Rakoff, rejected a $33 million SEC deal with Bank of America last September. Later, he approved a $150 million settlement in the case.

According to the Wall Street Journal, “The increased attention by federal judges over SEC settlements points to the delicate balance the SEC must strike as it pursues cases stemming from the 2008 crisis. It wants to hold senior executives accountable and create a deterrent for corporate wrongdoing, while avoiding excessive collateral damage for shareholders who were already victimized.”

We welcome your comments, but please adhere to our comment policy and the ABA Code of Conduct.

Commenting is not available in this channel entry.