A federal judge on Monday struck down a $285 million settlement that Citigroup reached with the Securities and Exchange Commission, citing a need for clarity about the financial markets and the SEC's responsibility to ensure the truth emerges.
U.S. District Judge Jed Rakoff said in a written ruling that "in any case like this that touches on the transparency of financial markets whose gyrations have so depressed our economy and debilitated our lives, there is an overriding public interest in knowing the truth."
The deal would have imposed penalties on Citigroup even as it allowed the company to deny allegations that it misled investors on a complex mortgage investment. The SEC accused the bank of betting against the investment in 2007 and making $160 million, while investors lost millions.
The SEC allowed a consent judgment settling the case to be filed the same day it filed its lawsuit against Citigroup, the judge noted.
"It is harder to discern from the limited information before the court what the SEC is getting from this settlement other than a quick headline," the judge wrote.
"In much of the world, propaganda reigns, and truth is confined to secretive, fearful whispers," Rakoff said. "Even in our nation, apologists for suppressing or obscuring the truth may always be found. But the SEC, of all agencies, has a duty, inherent in its statutory mission, to see that the truth emerges; and if it fails to do so, this court must not, in the name of deference or convenience, grant judicial enforcement to the agency's contrivances."
He set a July 16 trial date for the case.
Messages seeking comment were left with both sides.
Copyright 2011 The Associated Press.