RAKOFF SLAMS SEC

Trashes Citi’s fine

Citigroup’s rotten bonds have left a New York judge with sour grapes.

Manhattan federal judge Jed Rakoff on Tuesday begrudgingly approved the banking giant’s $285 million settlement with the Securities and Exchange Commission over the sale of toxic mortgagebacked securities after an appeals court overruled his 2011 decision to reject the deal.

Rakoff — sick of Wall Street firms getting little more than a slap on the wrist — launched his crusade against the SEC and others for settling cases without demanding an admission of wrongdoing or any executives taking the fall.

Although his standoff with the SEC won him fans, a federal appeals court ruled in June that he was out of bounds and “abused” his discretion “by applying an incorrect legal standard” to the case. The court sent the case back to Rakoff, giving him no choice but to approve the deal.

After losing his more than threeyear fight, the maverick jurist couldn’t resist getting in a dig or two in his biting, threepage opinion.

“That Court has now fixed the menu, leaving this Court with nothing but sour grapes,” Rakoff wrote in his ruling, in which he sarcastically refers to the appeals court as “[T]hey who must be obeyed.”

Rakoff also wrote that the appeals court set the precedent that regulatory agencies will “in practice be subject to no meaningful oversight whatsoever.”

The appeal was a win for the SEC, giving it wide latitude to decide fines and punishment for banks.

“We are pleased with the approval of the settlement that holds Citigroup accountable, deprives the firm of its illgotten gains, and provides $285 million for harmed investors,” Andrew Ceresny, the SEC’s enforcement division director, said in a statement.

Danielle Romero, a Citigroup spokeswoman, declined to comment.

In an opinion piece last year, Rakoff decried weakkneed prosecutors for settling cases without pursuing “progenitors of the fraud,” such as fallen junk bond king Michael Milken, as they had in the past.

“In striking contrast with these past prosecutions, not a single highlevel executive has been successfully prosecuted in connection with the recent financial crisis,” he wrote in the New York Review of Books.

Rakoff ’s opinion affirms the SEC’s initial fine with Citi neither admitting nor denying wrongdoing.