Rakoff Was Both Right and Victorious

Recall Federal District Judge Jed Rakoff’s decision a while ago rejecting an SEC-Citibank settlement, in which Citibank agreed to pay an enormous vigfine to the SEC in return for the latter’s desisting from harassinghectoring the former any further.  Rakoff’s heartburn concerned the lack of statement by either party of guilt or innocence by Citibank—Citi would simply pay the protectionfine and the SEC would stop its threats.

Now there’s an update to the SEC side of this.

The Securities and Exchange Commission intends to make companies and individuals admit wrongdoing as a condition of settling civil charges in certain cases, or be forced to fight the charges in court, the agency’s Chairman Mary Jo White said Tuesday.

Is this a direct result of Rakoff’s rudeness in holding out for actual culpability before a fine gets assessed?  Maybe, but not directly.  This change didn’t occur until after a review of the overall situation initiated by SEC Chairman Mary Jo White when she took over last spring.

It does, though, come after Rakoff’s argument that the ability to avoid admitting liability allows companies to treat settlements as just a “cost of doing business.”  He didn’t argue this explicitly, but I do: it also allows government agencies to extort money and other…concessions…from businesses and individuals with whom those agencies have a disagreement of any sort.  Sort of like the IRS and the DoJ do.

“Victorious” may be too strong, but this clearly is a step in the right direction.

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