As expected, the Second Circuit’s decision in a pending appeal involving Citibank paved the way for Judge Marrero to approve, in an opinion today, the SEC’s proposed $614 million settlement with SAC Capital. Judge Marrero initially expressed concern about the settlement being on a “neither-admit-nor-deny” basis, but, since then, a jury found former SAC Capital manager Matthew Martoma criminally liable for insider trading, and SAC Capital’s affiliate, CR Intrinsic, pled guilty to criminal insider trading. These facts appeared to assuage Judge Marrero’s earlier concerns:
[T]he guilty verdict in Martoma’s case and the guilty plea in CR Intrinsic’s own criminal case have cast the SEC’s “neither admit nor deny” settlement in this action in a different light: while presumably denying wrongdoing in a civil case, these defendants have been convicted of criminal offenses based on a prosecution for the same conduct and resting on a full factual record and application of the most rigorous evidentiary standard. As a matter of policy, then, the delay between the SEC’s filing of its Proposed Consent Judgments and the Court’s decision to approve those judgments today has served a purpose. It has called attention to the importance of more rigorous inquiry by the SEC in its application of “neither admit nor deny” provisions in settlements embodying the exceptional circumstances presented by this action, specifically those where parallel criminal cases track an SEC complaint arising from the same facts. In such instances, there may be value in a wait-and-see approach before rushing into a settlement and hurrying to a district court to seek approval of a proposed consent decree. Situations could arise, as might have been the case here, in which the outcome of a strong criminal case could strengthen the administrative agency’s hand in achieving a settlement more favorable to the public good and the interests of justice. Similarly, in some circumstances, a judge considering whether to enter such a proposed civil consent decree should weigh the value of holding an approval decision in abeyance pending the outcome of the parallel criminal litigation.