While SEC Chairman Mary Schapiro took her argument to key Congressional leaders, SEC Enforcement Chief Robert Khuzami issued a public statement on the court's refusal to approve the SEC settlement in the Citigroup case.  He opened with a defence of the $285 million settlement - stating that it was fair, adequate, reasonable, in the public interest, and reasonably reflects the scope of relief that would be obtained after a successful trial. Apparently Mr. Khuzami is ignoring the fact that the U.S. media - conservative and liberal, alike - expressed strong support for Judge Rakoff's decision.  And while some thought that the Judge had overstepped his authority, they deemed that aspect to be de minimus in the court's attempt to extract some measure of accountability by those who allegedly violated securities laws. Mr. Khuzami Continues. "The court's criticism that the settlement does not require an 'admission' to wrongful conduct disregards the fact that obtaining disgorgement, monetary penalties, and mandatory business reforms may significantly outweigh the absence of an admission when that relief is obtained promptly and without the risks, delay, and resources required at trial.  It also ignores decades of established practice throughout federal agencies and decisions of the federal courts. Refusing an otherwise advantageous settlement solely because of the absence of an admission also would divert resources away from the investigation of other frauds and the recovery of losses suffered by other investors not before the court.

[C-I Note: And how does Mr. Khuzami respond to the fact that Wall Street firms, like Citigroup, repeatedly appear before the SEC, FINRA and other government regulators on the same charges - even though they agreed in past settlements not to violate such rules and regulations in the future.  Oh, that's right, they never admitted to violating the rules at any point in time - including the present, so they have not, at any point in time, violated any earlier settlements.]

Mr. Khuzami Adds. The settlement provisions cited by the court have been included in settlements repeatedly approved for good reason by federal courts across the country - including district courts in New York in cases involving similar misconduct. We also believe that the complaint fully and accurately sets forth the facts that support our claims in this case as well as the basis for the proposed settlement.  These are not 'mere' allegations, but the reasoned conclusions of the federal agency responsible for the enforcement of the securities laws after a thorough and careful investigation of the facts.

[C-I Adds: And, yet, the SEC is time and again, hard-pressed (or mentally challenged) to identify an individual or individuals, who clearly have been delegated responsibility for fulfilling supervisory and/or management functions, including oversight and approval.]

Mr. Khuzami Concludes. Finally, although the court questions the amount of relief obtained, it overlooks the fact that securities law generally limits the disgorgement amount the SEC can recover to Citigroup's ill-gotten gains, plus a penalty in an amount up to a defendant's gain. It was for this reason that we sought to recover close to $300 million — all of which we intended to deliver to harmed investors.  The SEC does not currently have statutory authority to recover investor losses.

[C-I Note: We'll leave that point to Mary Schapiro and her contacts in the Senate.  Nevertheless, we refer Mr. Khuzami to our prior comment about the culpability of individuals because, they, after all, make the decisions and execute the bank's policies.]

Mr. Khuzami's Salutation. We will continue to review the court's ruling and take those steps that best serve the interests of investors. To access the original text of Mr. Khuzami's statement, go to: [SEC Staff Speeches, 11/28/11]