Voice of the People: Judge Rejects Injustice

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Judge Jed S. Rakoff of the U.S. District Court in Manhattan

Judge Jed S. Rakoff of the U.S. District Court in Manhattan

By James J. Devine

Judge Jed S. Rakoff of the U.S. District Court in Manhattan rejected a proposed $285 million settlement in a Citibank fraud case and challenged the Securities and Exchange Commission’s policy of allowing defendants to resolve an action without admitting or denying the allegations.

The Securities and Exchange Commission charged Citigroup’s principal U.S. broker-dealer subsidiary with misleading investors about a $1 billion collateralized debt obligation (CDO) tied to the U.S. housing market in which Citigroup bet against investors as the housing market showed signs of distress.

The scheme collapsed within months, leaving investors with losses while Citigroup made $160 million in fees and trading profits. Instead of allowing big banks to sweep problems under the run without accepting real responsibility and being held to account, Rakoff ordered the SEC to take the matter to trial.

Rakoff’s Nov. 28, 2011 decision triggered Congressional hearings to examine the decades-long practice by the Securities and Exchange Commission of sweeping cases under a rug.

Among the SEC enforcement actions that leave observers wondering was the case against former Countrywide Financial CEO Angelo Mozilo.

Mozilo was charged with securities fraud for deliberately misleading investors in schemes that resulted in $4.4 billion in 2005-2006 profits from $1½ trillion in mortgage sales and with insider trading for making nearly $140 million in profits by selling his Countrywide stock.

Mozilo agreed to never again serve as an officer or director of a publicly traded company and pay a $22.5 million penalty to settle those charges without having to admit or deny the allegations.

While Mozilo was left with only $117 million from his ill-gotten gains, many wonder why he should have been spared a long prison sentence.

Dozens of similarly weak sanctions related to the financial crisis have been consummated with Wall Street criminals by the emasculated agency.

With losses to the America economy estimated at $16 trillion to $22 trillion, a strong sense of injustice is due to the fact that nobody has gone to jail and less than $2 trillion has been recovered in fines and other penalties.

On January 19th, 137 events were held across the United States by progressive activists to urge President Obama to stand with America’s middle class, investigate the banks involved with the foreclosure crisis and hold them accountable.


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