SEC changes settlement language for some cases

Sat Jan 7, 2012 5:15pm EST
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By Aruna Viswanatha and Sarah N. Lynch

WASHINGTON (Reuters) - U.S. securities regulators said on Friday that defendants can no longer settle civil cases using "neither admit nor deny" language if they have already admitted to wrongdoing in parallel criminal cases.

The policy change, announced by Securities and Exchange Commission Enforcement Director Robert Khuzami on Friday, applies only to instances where a defendant has already admitted to violating criminal laws.

It comes just over a month after a federal judge in New York rejected a proposed $285 million settlement between the SEC and Citigroup, in part because the bank had not admitted to wrongdoing. However, in that case, no parallel criminal charges have been filed.

It seemed "unnecessary" for the SEC to include its traditional "neither admit nor deny" approach if a defendant had already been criminally convicted of the same conduct, Khuzami said.

For years companies have admitted to a narrow set of facts in resolving a criminal case with the Justice Department, while neither admitting nor denying more colorful language in an SEC complaint.

In one of the most egregious examples, Bernard Madoff pleaded guilty for his role in a multi-billion dollar Ponzi scheme in 2009, but neither admitted nor denied the allegations in a settlement with the SEC.

"It was ludicrous to say the defendant does not admit charges that he's already pled criminally guilty to," said John Coffee, a professor at Columbia Law School.

More recently, insurance brokerage firm Aon admitted to accounting errors to resolve criminal bribery charges with the Justice Department last month, but neither admitted nor denied related allegations from the SEC.   Continued...