Business / Technology

How one judge is causing angst on Wall Street — and among its regulators

SEC vs. WorldCom, 2003

Approved $750 million penalty

WorldCom's case was "perhaps the largest accounting fraud in history," Judge Jed Rakoff found. But he added in his decision: "To kill the company ... would unfairly penalize its 50,000 innocent employees" and reduce competition.

SEC vs. Bank of America, 2009

Rejected $33 million penalty

The Securities and Exchange Commission alleged that Bank of America lied to shareholders. Rakoff called the proposed settlement a "contrivance designed to provide the SEC with the facade of enforcement and the management of the Bank with a quick resolution of an embarrassing inquiry."

SEC vs. Bank of America, 2010

Approved $150 million penalty

The SEC came back to the court with a new proposal and more facts to support its case. Rakoff reluctantly approved the deal. "While better than nothing, this is half-baked justice at best," Rakoff said.

SEC vs. Citigroup, 2011

Rejected $95 million penalty *

The SEC filed a suit against Citigroup, alleging the company had sold a fund to investors then bet against the fund. Citigroup made about $160 million, while investors lost more than $700 million. Rakoff rejected the deal, saying it was hard to tell what the SEC was getting from it "other than a quick headline."

* In addition to the $95 million penalty, Citigroup would have had to give the SEC the $160 million in profits, plus $30 million in interest.