Corporate Governance

Court Refuses to Rubber-Stamp SEC-Citigroup Settlement

By Anthony F. Maul

In what is becoming a more common sight, a federal judge yesterday refused to sign offon the SEC?s settlement with Citigroup over the bank?s alleged understatement of its subprime exposure.  Judge Huvelle of the U.S. District Court for the District of Columbia questioned the fairnessof the $75 million settlement and was apparently perturbed that the SEC failed to pursue individual executives more aggressively.  The settlement has been criticized not only for its relative cheapness (the bank allegedly omitted to disclose over $40 billion in affected assets), but also for the fact that current shareholders will pick up the tab for conduct that supposedly harmed investors in the first place.  The SEC previously settled with two former Citigroup employees for just $180,000 for failing to disclose subprime risk.

Judge Huvelle has now asked the parties for an additional round of briefing, due September 8.  It will be interesting to see whether the Court will ultimately be persuaded to accept the accord as presently negotiated, or whether the Court?s skepticism will spur the SEC and Citigroup to restructure the settlement. 

Full post as published by PomTalk on August 17, 2010 (boomark / email).