The Business Roundtable doesn’t usually turn up in Securities and Exchange Commission enforcement litigation on the side of the enforcers. But given the group’s membership, it’s no surprise that the CEO club wants help fight the ruling by Manhattan federal district court judge Jed Rakoff that nixed the SEC’s proposed $285 million settlement with Citigroup.
The association, made up of CEOs of some of the nation’s largest businesses, filed a proposed amicus brief on Thursday supporting the SEC at the U.S. Court of Appeals for the Second Circuit. In the 6-page brief the Business Roundtable’s counsel, Mark Perry of Gibson, Dunn & Crutcher, called Judge Rakoff’s ruling a “novel, and potentially dangerous, approach to reviewing settlement agreements.”
Judge Rakoff rejected the proposed settlement last November, calling the SEC’s policy of allowing defendants to settle without admitting or denying wrongdoing “hallowed by history, but not by reason.” The $285 million deal would have allowed Citi to duck the question of culpability while resolving claims that it duped investors in a $1 billion collateralized debt obligation. The proposed settlement, the judge concluded, was “neither fair, nor reasonable, nor adequate, nor in the public interest.”
As we predicted from the get-go, the SEC appealed Judge Rakoff’s decision in December. Now, along with Citi, which is also appealing the ruling, the agency has a powerful ally as a proposed amicus. According to the BRT, member companies account for nearly a third of the total value of the U.S. stock market and fund nearly half of all private research and development in the U.S.
Gibson Dunn’s Perry wrote that Judge Rakoff’s decision to reject the proposed consent decree on the basis that the bank did not admit the allegations in the complaint poses a serious threat to a “long-standing and appropriate” practice. “[Allowing the decision to stand] would place courts in the position of micromanaging agencies’ enforcement decisions” even though the U.S. Constitution gives regulators the discretion to make such decisions, Perry wrote.
It’s also worth noting that the folks at the BRT expect a rise in government enforcement actions. Perry wrote that “federal enforcement actions will if anything become more frequent,” citing the launch of the Consumer Financial Protection Bureau and such new federal laws as the Dodd-Frank Wall Street Reform and Consumer Protection Act. We reached out to Perry for comment, but he was out of the office on Thursday.
This article priginally appeared in The AmLaw Litigation Daily.
