In an audacious move against Citigroup, the SEC, and the practice of "selling immunity", a Federal Judge in a NY District Court abruptly put the brakes on a settlement agreement proposed between the Obama Administration and another giant Wall Street firm accused of betting against their own investors.
Judge Jed Rakoff sent a message today to Wall Street and the Securities Exchange Commission that may send shockwaves through the financial world, refusing to approve a $285 million dollar payout to drop an investigation against Citigroup for defrauding investors without admitting any guilt.
Business Insider's haunting pullquote is a somber reminder of a core message of the Occupy movement. : "Judge Rakoff: Truth is Confined to Secretive, Fearful Whispers"
You might recall last year Goldman Sachs paid a $535 million dollar settlement "without admitting guilt" in a case brought by investors claiming fraud in a somewhat similar collateralized debt obligation scam. Goldman squirmed by, conceding they had provided 'incomplete information' but in this case, Citigroup had profited more blatantly at the expense of their clients.
With prosecutions for bank fraud today at a twenty year low, the Occupy movement has widely decried the questionable glad-handing between Wall Street titans and federal officials who are supposed to keep them honest. On his way out in 2008, President Bush issued a DOJ directive that encouraged the practice of "deferred prosecutions" which gave DOJ and SEC desk jockeys incredible latitude to craft immunity deals in secret in exchange for millions in fines and promises to be better.
But you might be disgusted to learn that the fines paid out to the government were at times equal to the payments made to legal firms, enriched by banks as grants of immunity prevented victimized investors from seeking further damages.
Rakoff's stand is consequential because any finding of guilt at last empowers the little-guy investor to bring civil suits.
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