A while ago, U.S. District Judge Jed Rakoff rejected a proposed settlement between Citigroup and the SEC for $285 million. The settlement would have ended a dispute between Citi and the SEC with Citi agreeing to obey the law, admit to no wrong-doing, and pay the vig. Rakoff’s rejection was based on two premises: if the bank had done the wrongs, then the settlement was far too small; but more importantly, with no admission of wrong-doing by Citi, the SEC’s acceptance of that, and so no wrong-doing having been done, there was no basis for the “fine” in the first place. With that settlement rejection, a trial of the actual issues at hand would have to proceed.
I won’t go into Citi’s rationale for accepting the settlement; Citi, in fact, insists that the SEC’s case is groundless:
In the event the case is tried, we would present substantial factual and legal defenses to the charges.
What’s of interest here is the government’s attitude. The SEC has appealed Rakoff’s rejection, claiming he made a “legal error” in his rejection: after all, this is the way the SEC has done business for a long time. Never mind the immutability of Rakoff’s logic that in the absence of actual wrong-doing, there was no basis for any settlement. No, the judge should have rubber stamped the government’s say-so because it was the government doing the saying.
However, as Rakoff points out in his response to the SEC’s appeal, there is no basis even for the appeal: the trial must go forward. Rakoff says, as WSJ Law Blog reports,
…to file a proper appeal, the SEC would have to show that it would suffer “immediate and irreparable harm from the denial” of the court-ordered provisions of the settlement—including a prohibition of future violations, a common feature in SEC deals.
The agency and Citi said they would have to allocate lots of resources to litigate the matter….
It seems the petty convenience of the government (or of Citi) isn’t a reason for appealing settlement rejection. A government imposed “settlement” based on nothing illegal having been done has no legitimacy. Rakoff reasoned in his appeal response in part by citing the Supreme Court:
As the Court (per Justice Souter) stated, there are innumerable situations, including rejections of settlement agreements, where the effect is to force the parties to litigate and go to trial even though they had expressly bargained not to. “But if immediate appellate review were available every such time, Congress’s final decision rule would end up a pretty puny one, and so the mere identification of some interest that would be ‘irretrievably lost’ has never sufficed….”
No, this is nothing more than a simple case of government ego getting in the way of government doing its job. Conduct the trial. Or let the settlement acknowledge actual wrongs.