U.S. securities regulators have said 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 January 9th, applies only to instances where a Defendant has already admitted to violating criminal laws. It comes 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.
Apparently, the SEC felt it wasn’t necessary to include its traditional “neither admit nor deny” approach if a Defendant had already been criminally convicted of the same conduct. 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.
More recently, insurance brokerage firm Aon admitted to accounting errors to resolve criminal bribery charges with the Justice Department, but neither admitted nor denied related allegations from the SEC. The practical impact of the change could be limited. Since Defendants will not be required to admit to allegations beyond those in a criminal case, it could do little to help private litigants sue on similar grounds, a concern companies have long raised. The SEC policy change comes after a review by senior enforcement staff that began last spring, according to Khuzami, who says it’s “unrelated” to the Citigroup ruling.
Source: Insurance Journal.
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