Judge Rejects Citigroup, SEC Settlement

A federal judge has nixed a $285 million settlement between Citigroup and the Securities and Exchange Commission. He said the deal was "neither fair, nor adequate nor in the public interest." The settlement dealt with Citigroup's handling of subprime mortgage debt prior to the financial crisis.

Copyright © 2011 NPR. For personal, noncommercial use only. See Terms of Use. For other uses, prior permission required.


In New York, yesterday, a federal judge rejected a settlement of a fraud case involving Citigroup. The Securities and Exchange Commission, which brought charges against the bank, had agreed to the $285 million deal. But Judge Jed Rakoff said he didn't believe the settlement was in the public interest. NPR's Jim Zarroli reports.

JIM ZARROLI, BYLINE: The SEC says Citigroup sold mortgage-backed securities to investors without telling them that some of the underlying assets were of questionable value. Judge Rakoff noted that if the allegations are true, they represent a substantial fraud by the company, but he said it was impossible to tell whether there was anything to the charges because there had been no trial. Instead, the SEC had agreed to settle the case and Citigroup had been allowed to accept the deal without acknowledging wrongdoing.

Such settlements are common at the SEC, but the judge said, because Citigroup continues to insist it did not commit fraud the facts of the case are unclear, and so, he said, it's impossible for him to say whether the settlement is fair. And he ordered the case to go to trial next July.

The SEC responded with a statement defending the settlement. It said, forcing Citigroup to admit wrongdoing would have forced the case to trial and wasted time and resources. Meanwhile, Citigroup said the settlement fully complies with long-established legal standards. Jim Zarroli, NPR News, New York.

Copyright © 2011 NPR. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to NPR. This transcript is provided for personal, noncommercial use only, pursuant to our Terms of Use. Any other use requires NPR's prior permission. Visit our permissions page for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.



Please keep your community civil. All comments must follow the NPR.org Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.

Support comes from: