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SEC-Citigroup Settlement Deal Originally Rejected is Overturned by Appeals Court

A judge’s decision was overturned on Wednesday by a federal appeals court in the federal settlement deal with Citigroup, according to The New York Times. The decision that was overturned was the rejection of the settlement deal. The judge who rejected the deal had concerns that the bank got away with just a slap on the wrist.

The opinion, 28 pages long, was published by a three-judge panel from the United States Court of Appeals for the Second Circuit. It came to the conclusion that the trial judge “abused its discretion by applying an incorrect legal standard in its review” of the case.

The judge being overruled in the opinion is that of Jed S. Rakoff. This new ruling should lead to the deal being approved.

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The opinion comes three years after the settlement was reached between the bank and the Securities and Exchange Commission.

Judge Rakoff viewed the deal as a sweetheart deal for the bank and called the settlement “pocket change.”

“The Second Circuit can’t put the genie back in the lamp,” said Jill E. Fisch, a professor at University of Pennsylvania School of Law. “This opinion is not going to turn back the clock.”

In its decision, the appellate panel wrote the following:

“It is an abuse of discretion to require, as the district court did here, that the S.E.C. establish the “truth” of the allegations against a settling party as a condition for approving the consent decrees. Trials are primarily about the truth. Consent decrees are primarily about pragmatism.”

The panel consisted of Rosemary S. Pooler, Susan L. Carney and Raymond J. Lohier Jr. The panel wrote that it “is not within the district court’s purview to demand ‘cold, hard, solid facts.”

The opinion was written by Judge Pooler, and it continued with, “On remand, if the district court finds it necessary, it may ask the S.E.C. and Citigroup to provide additional information sufficient to allay any concerns the district court may have regarding improper collusion between the parties.”

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