Citigroup case could head to court

A sign is displayed on the exterior of a CitiBank branch office on April 18, 2011 in San Francisco, Calif.

Jeremy Hobson: Now to New York, where a judge has put the kibosh on a $285 million settlement between Citigroup and the Securities and Exchange Commission. Citi had paid the money to settle fraud charges involving Citi's bets against mortgage securities that its own clients were invested in. But the judge says the deal may not have been fair to taxpayers and the case should go to trial.

Marketplace's New York bureau chief Heidi Moore joins us now live to discuss. Good morning.

Heidi Moore:Good morning.

Hobson: So, Heidi, how unusual is this? How often do these cases end up going to trial?

Moore: Almost never. The SEC doesn't have the budget and the financial firms obviously don't have the inclination -- they don't  want to face juries, especially when it comes to complex financial matters. So usually when a firm is caught by the SEC, it agrees to pay a fine and then signs an agreement that says that "it neither admits nor denies" the allegations. That's the standard language.

Hobson: And is that enough of a penalty? Does it end up changing behavior on Wall Street?

Moore: Never. The "neither admit nor deny" agreements the SEC makes are problematic. It doesn't represent the truth and it doesn't set any standard of behavior. Did they do something wrong, or didn't they? We should know.

Former Democratic Senator Ted Kaufman put it this way.

Ted Kaufman: How can you have the chutzpah to say, "I didn't do anything wrong, but I'm paying $285 million fine." They have to admit their guilt and if they won't, the SEC should go to trial and we should have a trial.

So that goes to the heart of a big question about the financial crisis: why didn't anyone really go to jail? And the problem is that basically, we have no real way of knowing what a financial crime is. Yeah, we have regulations -- but whenever anyone's caught, they "neither admit nor deny." So we're walking in this blind gray fog where we never have a firm conviction that something really illegal happened.

Hobson: Marketplace New York bureau chief Heidi Moore, thanks Heidi.

Moore: Thank you.

About the author

Heidi N. Moore is The Guardian's U.S. finance and economics editor. She was formerly the New York bureau chief and Wall Street correspondent for Marketplace.

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