Former Citigroup Manager Cleared in Mortgage Securities Case - NYTimes.com

Citigroup Global Markets sold derivative securities without disclosing that it was betting $500 million against them.  A jury has found that the bank's manager was neither negligent nor perpetrated a fraud in the sale of the securities.  To prevail SEC had to prove only that Stoker negligently made a material misrepresentation or omission.  But Stoker was able to rely on Citibank's vague warning that it might have "adverse interests" and the testimony of Credit Suisse and others that Stoker personally was not responsible - that control rested elsewhere. - GWC
Former Citigroup Manager Cleared in Mortgage Securities Case - NYTimes.com:

A jury on Tuesday cleared [Brian Stoker] a former Citigroup executive of wrongdoing connected to the bank’s sale of risky mortgage-related investments at the peak of the housing boom, dealing a blow to the government’s effort to hold Wall Street executives accountable for their conduct during the financial crisis.

In addition to handing up its verdict, the federal jury also issued an unusual statement addressed to theSecurities and Exchange Commission, the government agency that brought the civil case.

“This verdict should not deter the S.E.C. from investigating the financial industry and current regulations and modify existing regulations as necessary,” said the statement, which was read aloud in the courtroom by Judge Jed S. Rakoff, who presided over the trial.

“This verdict should not deter the S.E.C. from investigating the financial industry and current regulations and modify existing regulations as necessary,” said the statement, which was read aloud in the courtroom by Judge Jed S. Rakoff, who presided over the trial.


Stephen Plotnick, a partner at Carter Ledyard & Milburn who’s been following the case. His takeaway:


“It highlights one of the difficulties that the SEC faces in cases like these, which is that it’s difficult to get the Street to testify against the Street,” he said. A key witness in the case was a Credit Suisse collateral manager who testified that his firm had managed the collateral, Mr. Plotnick added. “It’s difficult to expect that Credit Suisse would concede, ‘We didn’t do our job.’”


SEC opposition to Stoker SJ motion


Stoker SJ motion


SEC v. Stoker - jury instructions by Jed S. Rakoff, D.J

For the complaint against Brian Stoker and other documents in the related SEC enforcement action against Citigroup Global Markets see  this page on Torts today

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