In 2011, Judge Jed Rakoff, presiding over the U.S. District Court for the Southern District of New York, rejected a $285 million settlement between the Securities and Exchange Commission and Citigroup over the allegedly fraudulent sale of mortgage bonds. On Wednesday, a three-judge panel of the U.S. Court of Appeals for the Second Circuit said Rakoff “abused [his] discretion,” overturned his controversial ruling, and clarified the standards by which other settlements should be reviewed.
Rakoff, at the time, objected to the settlement because the fine was, in his words, “pocket change” and complained that it allowed the bank to pay the fine without admitting guilt. The settlement was not “fair, reasonable, adequate and in the public interest,” the critic of the SEC’s longstanding “no admit, no deny” policy, said.
