In a sharply worded March 15, 2012 per curiam opinion (here), a three-judge panel of the Second Circuit granted the motions of Citigroup and the SEC to stay district court proceedings in the SEC's enforcement action against the company, so that the appellate court could consider the merits of the question of whether or not Judge Rakoff had properly rejected the parties' $285 million settlement agreement.
While the Second Circuit did not rule that Judge Rakoff's rejection of the settlement was improper, in concluding that that there was a substantial likelihood the parties would prevail on the merits on that question, the three-judge panel expressly rejected the reasoning on which Judge Rakoff had declined to approve the settlement.
In its enforcement action, the SEC alleged that Citgroup had made misrepresentations in its marketing of collateralized debt obligations. At the same time the SEC filed its complaint, the parties filed a consent judgment for court approval. Among other things, Citigroup agreed to pay $285 million into a fund to be distributed to CDO investors.
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Read other items of interest from the world of directors & officers liability, with occasional commentary, at the D&O Diary, a blog by Kevin LaCroix.
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