[ by Melanie Gretchen ] A federal jury on Tuesday acquitted a former Citigroup manager who of civil fraud charges that he misled investors on a pool of mortgages. Brian Stoker, who had worked on the bank's mortgage investments desk, was brought to trial by the SEC as part of a broader civil lawsuit against the bank. During the 2-week trial in Manhattan, presided by Judge Jed Rakoff, the SEC charged Mr. Stoker with having failed to tell buyers of a $1 billion Citigroup collateralized debt obligation ("CDO") that the bank had made a $500 million "short" bet against the mortgage pool - i.e., that it would fail. However, Stoker argued that he followed the bank's best practices and was singled out for blame.

[C-I Note: Considering how hard it is for regulators to get more than a settlement from corporations and individuals, the SEC's potential precedent get narrower.  Mr. Stoker is the first of 4 defendants who are scheduled to go to trial, rather than having agreed to settle with the SEC.  The others include Goldman Sachs Group executive Fabrice Tourre and Edward Steffelin of now-bankrupt GSC Capital Corp, which helped put a CDO together for JPMorgan Chase & Co.]

SEC Alternatives. Going forward, the SEC plans to appeal, according to Robert Khuzami, Director of SEC Enforcement, with encouragement from the 8 jurors who heard the evidence at Mr. Stoker's trial.  They gave Judge Rakoff a statement with the verdict, an extraordinary procedures in either civil or and criminal trials:

"This verdict should not deter the SEC from continuing to investigate the financial industry, to review current regulations, and modify existing regulations as necessary."

The case: SEC v. Stoker, U.S. District Court, Southern District of New York, No. 11-cv-7387. For further details, go to [Reuters, 7/31/12] and [Reuters, 7/31/12].