Jed Rakoff : A Judge in a league of his own
U.S. District Judge Jed Rakoff shows no signs of letting up on the SEC, refusing to rubber-stamp its proposed settlements, questioning whether its policies are in the public's interests — and doing it all with more than a touch of wit and eloquence.
U.S. District Judge Jed Rakoff shows no signs of letting up on the SEC, refusing to rubber-stamp its proposed settlements, questioning whether its policies are in the public’s interests — and doing it all with more than a touch of wit and eloquence.
In a decision last month that rejected a proposed settlement between the Securities and Exchange Commission and Citigroup Inc. over a mortgage-backed investment fund that allegedly misled investors, Mr. Rakoff said it was difficult to figure out “what the SEC is getting from this settlement other than a quick headline.”
In explaining his ruling, the 68-year-old judge questioned the long-standing SEC policy of allowing companies to settle claims without admitting or denying wrongdoing. Mr. Rakoff, who serves in the Southern District of New York, which has jurisdiction over Wall Street, said that a lack of admission of facts by Citigroup made it impossible for him to determine whether the proposed $285 million settlement was in the public’s interests. He scheduled a July trial.
The case comes less than two years after Mr. Rakoff refused to approve a settlement between the SEC and Bank of America Corp. requiring the parties to revise their agreement and increase the bank’s fine to $150 million, from $33 million.
Many observers have noted Mr. Rakoff’s seeming desire to hold Wall Street accountable for the 2008 economic collapse. In his Citigroup decision, he wrote that the case involves the “transparency of the financial markets whose gyrations have so depressed our economy and debilitated our lives.”
The impact of Mr. Rakoff’s decision in the Citigroup case could be considerable, because regulators in most branches of the government allow firms to skirt the admission of guilt in exchange for settlements that they contend are in the best interests of the public. However, Mr. Radoff’s bold strike will have an impact only if other judges follow suit.
“This is a decision by one of the brightest and most thoughtful trial judges in the country, but it’s just one judge,” said Stephen Crimmins, a partner at K&L Gates LLP and former deputy chief litigation counsel in the SEC’s enforcement division. “It will be interesting if other trial judges do the same around the country.”
The decision already has drawn the praise of at least one member of Congress.
“Judge Rakoff is right to ask for information,” Iowa Sen. Charles Grassley, the ranking Republican member of the Senate Judiciary Committee, said in a statement. “The SEC needs to provide a clear rationale for the enforcement penalties in this case and in others.”
A Philadelphia native, Mr. Rakoff is no stranger to issuing controversial opinions from the bench, to which he was appointed in March 1996. In a 2002 ruling, he targeted the death penalty, saying it is “the state-sponsored murder of innocent human beings.” His decision in that case was reversed by the 2nd U.S. Circuit Court of Appeals.
Before President Bill Clinton nominated Mr. Rakoff to the federal bench, he worked at several large law firms and served as a prosecutor with the U.S. Attorney’s Office in Manhattan from 1973 through 1980, where he helped to prosecute Michael Milken.
He’s taught classes at Columbia Law School since 1988, including one on white-collar crime.
A 2003 commencement speech at Swarthmore College, his alma mater, pretty much answers the question of whether Mr. Rakoff is likely to back off on securities regulators.
He advised graduates: “After you reach a considered judgment, please speak your mind, whatever the cost.”
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