Judge challenges $285 million Citigroup settlement

A federal judge in New York is casting doubt on the fairness of a $285 million settlement that Citigroup reached with the Securities and Exchange Commission.

Judge Jed Rakoff in Manhattan scheduled a Nov. 9 hearing on the deal announced earlier this month.

He challenged lawyers to explain why he should approve a settlement of serious securities fraud allegations when Citigroup Inc. neither admits nor denies wrongdoing.

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Among his questions: "How can a securities fraud of this nature and magnitude be the result simply of negligence?" and "What reason is there to believe this proposed penalty will have a meaningful deterrent effect?"

He also questioned whether there is an overriding public interest in determining whether the SEC's charges are true.

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He wants to know how a $95 million penalty will have a meaningful deterrent effect. He noted the penalty was one-fifth the amount imposed in a case against Goldman Sachs Group Inc. last year.

A Citigroup spokeswoman declined to comment Thursday.