Legal News

Rakoff on BofA/SEC Kerfuffle: ?Everything Needs to be Public?

By Ashby Jones

When Manhattan federal judge Jed Rakoff declined to give his approval on a recent settlement between the SEC and Bank of America, it raised some eyebrows. But for those familiar with Judge Rakoff’s sometimes iconoclastic ways, it was so much business-as-usual.

In any event, providing further proof that the judge does things his own ways, Rakoff recently sat down with a New York Times reporter to chat about the rationale behind the ruling and, it seems, to reminisce. Click here for the story. Click here and here for previous LB posts on the SEC/BofA matter.

Both the SEC and Merrill are slated to file reports to him Monday detailing who knew what about $3.6 billion in bonuses paid out by Merrill Lynch just before Bank of America took it over last year.

To the NYT, Rakoff spoke of a time when executives were held more directly accountable for actions taken by their companies, when wrongdoing couldn’t just be assigned to the company itself. "The feeling then," he said, "was if a crime had been committed, it was important to discover who the persons were who made the wrongful decisions."

At a hearing earlier this month, Rakoff said it appeared the bank had "effectively lied to its shareholders" about Merrill's bonuses. Those bonuses, Rakoff said, had been paid by American taxpayers, since the bank received a second bailout shortly afterward.

Partly for that reason, transparency, in this instance, was warranted. "Everything needs to be public," he told the Times. "The legitimacy of the courts comes from the fact that they reason openly, on the record, based on facts."

On the reminiscing front, Rakoff, during the NYT interview, highlighted a “photo montage” from the court's annual Courthouse Follies, depicting “three singing hobos, judges all, performing a song written by Judge Rakoff.” One of the “hobos,” Sonia Sotomayor, wore a red bandanna. Rakoff word “a fake black tooth and smudges on his cheeks.”

"I have a past of making a fool of myself," he said.

Good stuff. Our favorite line from the piece, however. When asked if he is anti-Wall Street, however, Rakoff responded: "The plaintiffs bar sometimes thinks I'm pro," noting that he had dismissed a number of shareholder cases against companies for lack of evidence.

Full post as published by Law Blog - WSJ.com on August 24, 2009 (boomark / email).