Jan 12 (Reuters) - A group of chief executives at more than
200 large U.S. companies urged a federal appeals court to undo a
judge's controversial decision making it harder for companies to
settle U.S. Securities and Exchange Commission fraud cases.
The Business Roundtable said companies face "protracted and
expensive litigation" if the "novel, and potentially dangerous"
reasoning used by U.S. District Judge Jed Rakoff to scuttle an
SEC fraud settlement with Citigroup Inc is not thrown out.
In that Nov. 28 decision, the Manhattan judge rejected the
SEC's long-standing practice of not requiring settling companies
to admit or deny its charges.
The regulator had accused Citigroup of selling $1
billion of risky mortgage securities without telling investors
that it was simultaneously betting against that debt.
But Rakoff said that by not forcing Citigroup to address
whether it did anything wrong, the SEC left him no way to know
whether the $285 million settlement was fair.
In a court filing on Thursday, lawyers for the CEOs told the
2nd U.S. Circuit Court of Appeals that Rakoff's decision
improperly adds legal burdens to companies already facing
increased regulation, including the recent Dodd-Frank financial
reforms and the new Consumer Financial Protection Bureau.
Mark Perry, a lawyer for the CEOs, said allowing Rakoff's
reasoning to stand would result in courts having to start
"micro-managing" agencies' enforcement decisions, and delay
recoveries for victims of alleged corporate fraud.
"The ability of an agency to set forth clear rules and
obtain speedy relief for injured parties often outweighs the
agency's interest in obtaining admissions of wrongdoing and a
final judgment," Perry wrote.
Last Friday, the SEC said it will no longer include "neither
admit nor deny" language in civil fraud settlements where
defendants at the same time admit to or are convicted of
criminal violations.
Such cases, however, comprise only a small minority of SEC
enforcement actions. The policy change also would not have
affected the Citigroup case, which has no criminal component.
Business Roundtable members run companies that generate more
than $6 trillion of annual revenue.
Citigroup chief Vikram Pandit is a member of the group.
Other members are Goldman Sachs Group Inc chief Lloyd
Blankfein, JPMorgan Chase & Co chief Jamie Dimon, and
Bank of America Corp chief Brian Moynihan, whose banks
agreed in the last two years to pay more than $850 million in
major SEC fraud cases. None admitted wrongdoing.
The 2nd Circuit last month temporarily halted proceedings in
the Citigroup case. It plans on Jan. 17 to consider an SEC
request for a longer halt so it can appeal Rakoff's decision.
The cases are SEC v. Citigroup Global Markets Inc, 2nd U.S.
Circuit Court of Appeals, No. 11-5227; and U.S. District Court,
Southern District of New York, No. 11-07387.
For the SEC: Jacob Stillman, Jeffre Berger and Mark
Pennington.
For Citgroup: Brad Karp, Susanna Buergel and Theodore Wells
of Paul, Weiss, Rifkind, Wharton & Garrison.
(Reporting by Jonathan Stempel)
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