When U.S. Judge Jed Rakoff rejected the SEC's settlement with Citigroup back in November 2011, it played perfectly with the themes being espoused by Occupy Wall Street. In similar cases leading up to Citigroup, Judge Rakoff had characterized the SEC's "neither admit nor deny" approach as no more than “a contrivance designed to provide the SEC with the facade of enforcement … [where] the SEC gets to claim that it is exposing wrongdoing on the part of Bank of America in a high-profile merger; the bank's management gets to claim that they have been coerced into an onerous settlement by overzealous regulators. And all this is done at the expense, not only of the shareholders, but also of the truth.” Despite his objections, Judge Rakoff nonetheless approved such settlements between the SEC and both Bank of America and Vitesse.
In Citigroup, however, Judge Rakoff refused to approve the settlement, and found that "a consent judgment that does not involve any admissions and that results in only very modest penalties" appears to be simply "a cost of doing business imposed by having to maintain a working relationship with a regulatory agency, rather than as any indication of where the real truth lies." He found the proposed consent judgment in Citigroup to be "neither reasonable, nor fair, nor adequate, nor in the public interest." Massimo Calabresi of Time Magazine wrote that via the Citigroup ruling, Judge Rakoff
effectively marched out of the federal courthouse on Foley Square and took his place as the most powerful protester in Zuccotti Park. In a blunt court order, Rakoff broke with decades of judicial deference to the feds and suggested that regulators were enabling Wall Street's efforts to hide allegedly "knowing and fraudulent" acts from the public....
In March 2012, the Second Circuit stayed the proceedings before Judge Rakoff, finding that he did not "appear to have given deference to the S.E.C.'s judgment on wholly discretionary matters of policy.... It is not, however, the proper function of federal courts to dictate policy to executive administrative agencies." The Second Circuit concluded that the SEC and Citigroup had a "strong likelihood" of success in setting aside Judge Rakoff's rejection of their settlement.
The appeal is ongoing, however, and this week Occupy Wall Street showed its support for Judge Rakoff by filing an amicus curiae brief in the Second Circuit. The brief, filed by OWS's "Alternative Banking Group," argues that
Citigroup and the SEC have mischaracterized the central issue in this case as whether the District Court was correct in demanding an absolute admission of liability as a necessary condition to confirmation, in an attempt to destroy the hallowed practice of settlement-by-consent-decree. In reality, this case is simply about whether a district court has the authority to demand the adequate production of facts to assess how a proposed consent order would affect the public interest. A district court does have that authority, which renders these appeals unripe for review.
OWS further argues that:
The SEC's interest is to settle this case quickly in order to reduce its workload, given its limited resources. However, the public's interest goes well beyond the SEC's costs. The public has a stake in obtaining a) full transparency as to the specifics of this case, and b) punishment sufficient to deter abusive conduct in the future. Thus, the SEC is an imperfect proponent of the public interest, and its assertions that it represents that interest must be viewed skeptically.