Professor Alan Palmiter weighs in on financial rulings of Jed Rakoff
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December 20, 2012
Many people looked at the financial crisis and thought, “How on earth did nobody take the blame for this?” Jed Rakoff had the same thought.
The difference between Rakoff and everyone else: He sits on the federal bench in Southern District of New York – Grand Central for financial shenanigans. Rakoff has already overseen high-profile cases involving WorldCom and Bernard Madoff, among others. But one recent ruling has the potential to reshape the way Washington cops like the Securities and Exchange Commission police Wall Street, legal experts say. At issue: Whether companies can continue to settle charges by coughing up a fine but not actually acknowledging they did anything wrong. The formula, which typically involves a statement that the accused “neither admits nor denies the allegations,” is popular with regulators that don’t want to waste precious resources on costly and difficult court fights. But Rakoff, who rejected the approach in a surprise 2011 ruling involving Citigroup, argues it allows big-name companies to view regulatory dust ups as “a cost of doing business.” Rakoff’s ruling is currently being appealed. But even if he’s overturned, the dustup could mean tougher policing in the future, according to Wake Forest law professor Alan Palmiter. “The SEC’s lawyers will think twice” from now on, he says. “Nobody wants to expose a settlement to this kind of criticism.”
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