by Brian Mahany
Anyone interested in knowing about whistleblowers and the law should visit whistlewatch.org. That is the website of Whistle Watch – the Brown Center for Public Policy organization, an IRS recognized nonprofit. The organization is a clearing house for current information about whistleblower actions, laws and protections for whistleblowers facing retaliation. In the words of Evelynn Brown, the organization’s director, it is also a “lifeline” for people who simply don’t know where to turn.
Whistlewatch also has a blog. Today’s hat tip goes to Evelynn and her post on Judge Rakoff’s decision to refuse to bless the sweetheart deal negotiated between Citigroup (parent of Citibank) and the SEC.
U.S. District Judge Judge Jed Rakoff yesterday rejected a $285 million settlement over a mortgage debt deal. Like several other banks, Citi is accused of peddling toxic mortgage debt to unsuspected buyers. In essence, Citi was dumping its own bad mortgage debt while telling investors it was a good deal.
If that sounds illegal, it is. Unfortunately, the SEC attempted to let Citi simply write a check and admit no wrongdoing. Citi agreed to the $285 million fine and promised to reform its practices. This procedure is typical of many SEC enforcement actions – “I didn’t do anything wrong and promise not to do it again.” No criminal prosecutions. No admission of wrongdoing that could later be used in a lawsuit by those hurt by Citi’s actions.
For many companies, the SEC’s fines simply become a cost of doing business. By not requiring any admission of wrongdoing, the SEC protects the business from its victims – the same victims the SEC is supposed to represent and protect. The cases are resolved before trial and before anyone must take the stand and admit to their actions. In essence, no one is held accountable for their wrongdoing.
Of course, the SEC disagrees and points to the hundreds of successful enforcement actions it brings each year and the hundreds of millions in fines collected.
Judge Rakoff’s decision yesterday not to approve the settlement appears more based on principal then money. One commentator called it a “judicial asskicking.” Our friend Evy Brown says that the SEC’s agreement failed to pass the “puke test.” Everyone agrees the court’s action was highly unusual.
Although the judge does question the amount of the settlement, his harshest criticism is reserved for the SEC which he says failed to insure that any of the fine money would be returned to the defrauded investors and noted that the proposed agreement would make it harder for those victims to sue Citi and achieve justice.
Is this spillover from Operation Wall Street? Are judges simply getting tired of companies committing crimes and walking away with a fine? Or is this case simply an anomaly not likely to be repeated? We are not sure which but welcome more light being shined down on these backroom deals.
Our readers know that we are currently pursuing one of the largest whistleblower cases ever litigated for mortgage fraud – the $2.4 billion case against Allied Home Mortgage. That case is being pursued by HUD and Preet Bahara, the U.S. Attorney for Manhattan. Bahara is a well known, strong advocate for corporate accountability.
If you have information about a fraud or are the victim of a fraud, call us. Our fraud and asset recovery lawyers have helped people across the United States. For more information, contact attorney Brian Mahany at (414) 704-6731 (direct) or by email at brian@mahanyertl.com. All calls are strictly confidential.
Mahany & Ertl – America’s Fraud Lawyers. Offices in Milwaukee, Detroit and Portland.
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