NY Judge Rejects SEC/Citibank Mortgage Fraud Fine

(2 pm. – promoted by ek hornbeck)

Cross posted from The Stars Hollow Gazette

Bloomberg News is reporting that a NY Federal Judge has rejected the $285 million settlement that Citibank had negotiated with the SEC over $1 billion in mortgage securities fraud that would also have exonerated the bank of guilt. Citibank Citibank had led investors to believe that the mortgage investments were safer than they actually were, leading to a financial loss of around $700 million.

U.S. District Judge Jed Rakoff rejected the settlement in an opinion released today. The judge has criticized the agreement for permitting New York-based Citigroup to settle without admitting or denying liability in the matter. [..]

“In any case like this that touches on the transparency of financial markets whose gyrations have so depressed our economy and debilitated our lives, there is an overriding public interest in knowing the truth,” Rakoff wrote in the opinion.

Rakoff consolidated the case with another SEC suit involving former Citigroup employee Brian Stoker and scheduled the combined case for trial on July 16, 2012. The parties may try to reach a revised settlement, which must be approved by Rakoff to take effect.

From Think Progress:

The “judge wrote that there is an overriding public interest in knowing the truth about the financial markets. He set a July 16 trial date for the case.”

The SEC should have fined them twice the losses, not that it would have deterred Citibank from doing it again.