Among the questions that Judge Jed Rakoff demanded an answer to in reviewing the SEC's recently proposed "no admit, no deny" settlement with Citigroup was the following:

Why should the Court impose a judgment in a case in which the S.E.C. alleges a serious securities fraud but the defendant neither admits nor denies wrongdoing?

The SEC responded in a brief to the court that although the lack of any admission by defendants clearly has its advantages and disadvantages, the Commission's requirement that defendants may not deny the allegations "is more robust than that of other federal agencies, which generally do not preclude a defendant from denying the agency's allegations in enforcement actions and often include express denials within the consent decrees."

Despite this language, however, defendants continue to issue after-the-fact denials without any apparent repercussions. At the SEC Speaks conference in February 2011, Commissioner Luis Aguilar denounced the practice of SEC defendants who settle and subsequently issue press releases or other statements arguing that their conduct "was really not that bad or that the regulator over-reacted."  If such statements continue, he said, "it may be worth revisiting the Commission's practice of routinely accepting settlements from defendants who agree to sanctions 'without admitting or denying' the misconduct."

The most recent example of an SEC defendant seemingly ignoring the "no denial" language of a settlement comes from Jeff “Whitey” Richardson, a former major league baseball player who the SEC sued for insider trading on November 23, 2011. Richardson settled the case, agreeing to pay disgorgement of $88,026, a civil penalty of the same amount of $88,026, and prejudgment interest. He also agreed, of course, that he would neither admit nor deny the allegations. As noted by David Smythe in his Cady Bar the Door blog,  Richardson was quoted in the Omaha World-Herald on Nov. 26, 2011 as saying, “We don't feel like we did anything wrong.  To fight these guys in Washington, the expense it would have cost, is just crazy. It was cheaper for us to settle it and move on.” 

Other examples of post-settlement denials can be found here. As Smythe observes, it will be interesting to see if there are repercussions from Richardson's comments--particularly at a time when the SEC is pointing to "no denials" as a key reason why its "no admit, no deny" policy should not be questioned by the courts.

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