For the next hour, Judge Rakoff proceeded to grill SEC chief litigation counsel Matthew Martens and Citi lawyer Brad Karp of Paul, Weiss, Rifkind, Wharton & Garrison about why he should approve the deal, which would resolve claims that Citi defrauded investors in a collateralized debt obligation. He zeroed in on the SEC’s statement in a brief two days earlier that “the public interest” was not the “applicable standard of judicial review” for consent judgments that the agency presents to the federal courts.
Judge Rakoff pointed out that in papers filed before he was assigned to the case, the SEC itself stated that the public interest was an issue to be taken into account in weighing the settlement. Martens responded that the SEC had reviewed the case law more closely after Judge Rakoff began questioning the deal and had concluded that the public interest standard “had not been recognized in SEC cases.”
