Skip to content

Judge Rakoff Refuses To Rubber Stamp Citigroup Consent Judgment

The blistering opinion rendered by Judge Jed Rakoff in the matter of the S.E.C. v. Citigroup Global Markets got very little attention yesterday in the midst of all the hoopla surrounding a woman with a cell phone bill who claims Herman Cain was her lover. I know the speculation about whether or not Ginger White was or was not the mistress of Mr. Cain, or how much money Mr. Cain may or may not have given her, or the frightened look in Ms. White’s eyes, possibly because she may or may not have enough money to pay her rent next month, make for a pretty titillating story, but if you are craving real histrionics, you need to take twenty minutes and read in toto Judge Rakoff’s fifteen page opinion.

“The injunctive power of the judiciary is not a free roving remedy to be invoked at the whim of a regulatory agency, even with the consent of the regulated. If its deployment does not rest on facts – cold, hard, solid facts, established either by admissions or by trials – it serves no lawful or moral purpose and is simply an engine of oppression.”


Rakoff does not mince words in his opinion. He charges out of his corner like Mike Tyson in his prime, raining a quick rat-a-tat-tat of metaphorical blows on the SEC’s complaint practically from the second the bell rings as he notes drily that the regulatory agency had filed a parallel complaint on the same day against a Citigroup employee that alleged fraudulent intent while charging Citigroup in this complaint with negligence for the same offense, a prosecutorial choice Judge Rakoff plainly states is “in violation of Sections l7(a) (2) and (3) of the Securities Act, 15 U.S.C. § 77q(a) (2) and (3).”

“Since then, the Court has spent long hours trying to determine whether, in view of the substantial deference due the S.E.C. in matters of this kind, the Court can somehow approve this problematic Consent Judgment. In the end, the Court concludes that cannot approve it, because the Court has not been provided with any proven or admitted facts upon which to exercise even a modest degree of independent judgment.”


I can’t understand why Judge Rakoff has decided to tee off on the SEC this time, since refusing to admit or deny the allegations of the complaint has been standard corporate operating procedure for decades, with full complicity by this judge and others. Maybe it was this Consent Judgment that was the straw to finally break the camel’s back. Maybe it was the juxtaposition of the two complaints against Citigroup and one of Citigroup’s employees, with practically identical circumstances in the case of the corporation and the employee that made it impossible for this judge to stomach yet another egregious example of the government’s often unequal application of the law.  

Or maybe it was the presence of all those bodies that had been occupying Zucotti Square for weeks on end, all those bodies of fed up American citizens occupying public spaces in practically every state in the union that had somehow seeped into the judge’s subconscious. This we may never know. But what we do know is this tartly composed fifteen page opinion by Judge Rakoff does procedurally what the American public at large has desired for some time without changing a single law.

A man who, in a time of great economic turmoil, against the interests of an industry with many hundreds of billions of dollars at stake, is willing to write these words:

“…the Court is forced to conclude that a proposed Consent Judgment that asks the Court to impose substantial injunctive relief, enforced by the Court’s own contempt power, on the basis of allegations unsupported by any proven or acknowledged facts whatsoever, is neither reasonable, nor fair, nor adequate, nor in the public interest.

It is not reasonable, because how can it ever be reasonable to impose substantial relief on the basis of mere allegations? It is not fair, because, despite Citigroup’s nominal consent, the potential for abuse in imposing penalties on the basis of facts that are neither proven nor acknowledged patent. It is not adequate, because, in the absence of any facts, the Court lacks a framework for determining adequacy. And, most obviously, the proposed Consent Judgment does not serve the public interest, because it asks the Court to employ its power and assert its authority when it does not know the facts.”


is a man in danger.

 Yesterday, I wrote about a miscarriage of justice in Kansas, where the governor’s so-called communications director felt it was her duty to muzzle to voice of a student bored by the governor’s rhetoric who happened to air her opinion on Twitter. The internet came to her rescue. The governor apologized.

“Finally, 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. In much of the world, propaganda reigns, and truth is confined to secretive, fearful whispers. Even in our nation, apologists for suppressing or obscuring the truth may always be found. But the S.E.C., of all agencies, has a duty, inherent in its statutory mission, to see that the truth emerges; and if fails to do so, this Court must not, in the name of deference or convenience, grant judicial enforcement to the agency’s contrivances.”


But who is going to come to the rescue of Judge Rakoff, who is essentially a rogue judge when compared those the vast majority of jurists in his position who have learned to rubber stamp these kinds of consent judgments and consider their decisions justice? What will the public do when the designated henchmen from the White House and K Street, who have no desire to see the status quo in the legal landscape for Wall Street change, and the congressmen and women, who are bought and paid for like so many Black Friday sale items from Walmart, begin to bring immense pressure to bear to counteract justice as it should be meted out?


Up Next