The tiff that began when Judge Rakoff refused to approve the SEC's proposed settlement of fraud charges with Citigroup has now escalated into something approaching open warfare. Judge Rakoff denied the SEC's motion for a stay of his order pending interlocutory appeal. The SEC then went over Rakoff's head and got an order from the Second Circuit granting an emergency stay so that the interlocutory appeal may be taken:
In a decision issued Tuesday, the U.S. Court of Appeals for the Second Circuit authorized such a temporary delay until a panel convenes to consider the matter further. This panel, which will begin deliberations on Jan. 17, will then make a decision on whether to delay the case against Citi indefinitely pending the outcome of the SEC's appeal.
Which prompted Rakoff to issue a supplemental Order:
He [noted] sourly in an order Thursday that he “spent the intervening Christmas holiday” considering the SEC and Citigroup’s requests to freeze a lawsuit against the bank over allegations that it defrauded investors.
But he also made a much more serious charge: That the agency misled him and the U.S. Court of Appeals in seeking to halt the lawsuit while the agency appeals Rakoff’s rejection of a $285 million settlement with the Citigroup. FT has the story here. ...
The Order is embedded in the WSJ blog post. To yours truly, the most striking part of the Order is in the final paragraph:
Accordingly, the Court is filing this Supplemental Order, both to make the Court of Appeals aware of this background and to attempt to prevent similar recurrences. Specifically, the parties are hereby ordered to promptly notify this Court of any filings in the Court of Appeals by faxing copies of any such filings to this Court immediately after they are filed in the Court of Appeals. In addition, this Court will send a copy of this Supplemental Order, as well as the Memorandum Order that it supplements, to the Court ofAppeals with a request that they be furnished to the motions panel hearing the stay motion on January 17, 2012.
In effect, Rakoff has accused the SEC and Citigroup of commiting a fraud on both his court and the court of appeals. Further, of course, Rakoff is using this order to send a signal to that effect to the court of appeals. He's also sending the SEC a signal that taking an appeal will not divest Rakoff of his ability to continue spanking the agency when and as he sees fit.
It's all getting quite melodramatic.