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Another Judge Slaps Down SEC

A judge says she won't rubber stamp an SEC settlement with Citigroup.
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) -- A second judge has failed to approve a high-profile settlement involving the

Securities and Exchange Commission

and a key player in the financial crisis.

The judge this time around is U.S. District Judge Ellen Segal Huvelle. As

The Wall Street Journal

reported Tuesday, Huvelle has held up a $75 million settlement between the SEC and


(C) - Get Citigroup Inc. Report

, after Citi failed to disclose $40 billion in subprime assets to shareholders in 2007. The SEC reached a separate but related settlement with two executives, Gary Crittenden, Citigroup's CFO at the time of the alleged wrongdoing, and Arthur Tildesley Jr., then-head of investor relations. The men agreed to pay a combined $180,000, without admitting they did anything wrong.

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Huvelle requested additional information from the SEC and Citigroup, saying she didn't understand why shareholders should be penalized if the bank failed to keep them in the loop. She also couldn't grasp why Crittenden and Tildesley were the only individuals the SEC sought to penalize when the complaint mentioned other top Citigroup executives.

The proposed Citigroup settlement resembles one involving the SEC and

Bank of America

(BAC) - Get Bank of America Corporation Report

, after the Charlotte-based banking giant failed to disclose billions of losses at Merrill Lynch which surfaced just prior to its takeover of Merrill at the start of last year. Federal judge Jed Rakoff threw out a proposed $33 million settlement before ultimately holding his nose and approving a $150 million fine.

"Deja vu, all over again!" wrote Columbia University securities law professor John Coffee, in an email exchange with


. "I do not think the Citigroup case is as pathological as the B of A settlement that Judge Rakoff rejected because there is less mystery as to who did what. Still, the SEC is making no more than slow progress at lifting the corporate veil and determining who actually made corporate decisions."


Written by Dan Freed in New York


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