There are those occasions when the choice for Truthdigger of the Week is so clear that our tribute practically writes itself. This is one of those times, as this installment is about U.S. District Judge Jed S. Rakoff, who consistently demonstrates that he’s game to take on some of the country’s most powerful and corrupt institutions and policies.
Judge Rakoff’s most recent action to grab our attention amounted to a very public, and deserved, embarrassment for both Citigroup and the Securities and Exchange Commission. As we summarized Monday, Rakoff rejected Citigroup’s attempt to evade culpability for swindling customers out of more than $700 million by selling them on bad investments in the mortgage market. Here’s how Forbes explained Citi’s initial offense.
The charges Citi is [facing are] related to bets made by investors on the housing market that went bad when the bubble collapsed. In the years since the financial crisis, details have come forth about institutions that carefully selected securities in a portfolio, or allowed a client to do so, without notifying investors of the short bets made by those who picked the composition.
This was bad enough, but strike two for Citigroup happened when the financial giant tried to take an all-too-familiar way out, with the SEC’s complicity, by agreeing to pay a settlement of $285 million and calling it a day. Although the proposed payment is substantially hefty, what this response doesn’t include is an actual admission of guilt.
Clearly, Judge Rakoff was well aware of the significance of this attempted solution, and he called out both Citi’s sketchy gesture and the SEC’s part in supporting corporate corruption by serving them notice in an eloquently worded rejection on Monday. The full text of Rakoff’s ruling is well worth a read, but here’s a teaser in the meantime:
Finally, in any case like this that touches on the transparency of financial markets whose gyrations have so depressed our economy and debilitated our lives, there is an overriding public interest in knowing the truth. In much of the world, propaganda reigns, and truth is confined to secretive, fearful whispers. Even in our nation, apologists for suppressing or obscuring the truth may always be found. But the S.E.C., of all agencies, has a duty, inherent in its statutory mission, to see that the truth emerges; and if fails to do so, this Court must not, in the name of deference or convenience, grant judicial enforcement to the agency’s contrivances.
The significance of Rakoff’s decision wasn’t lost on University of Denver law professor J. Robert Brown Jr., who told Bloomberg, “It’s a frontal assault on the ‘neither admit nor deny’ approach.” Not surprisingly, both the SEC and Citigroup disagreed with the judge’s reasoning, and we particularly enjoyed the careful wording of an email by a Citigroup spokeswoman quoted in that same article: “The settlement fully complies with long-established legal standards.”
That may be true, but when the standards themselves are the problem, that’s when someone needs to summon the chutzpah to call them into question, which is just what Rakoff did. As Truthdig’s own Robert Scheer pointed out in a recent column, Citigroup has ties to key players in President Obama’s, as well as President Clinton’s, economic advisory teams (see: Robert Rubin), once again underscoring the cozy relationship between Wall Street and the White House. As Rakoff’s background demonstrates, he has made a long and storied career of chasing down white collar crime and taking on big banks (not to mention the death penalty, while he was at it), and he had some practice for this latest case from his previous dealings with Bank of America and the SEC. For his commitment to finding the truth and using his gavel to drive it home, it’s Judge Rakoff for the win this week. —KA
Composite image: Handout / Mary Altaffer, AP