FORTUNE -- Do you think you would be ticketed for speeding while your mayor would get off scot-free? The ability of the powerful to skirt justice is a common theme in politics and business. And an appeals court will soon rule whether the Securities and Exchange Commission and Citigroup (C) will get to exercise this unsavory tradition.
It all began when the SEC accused Citigroup of misleading customers into purchasing mortgage securities. The financial giant wants to pay $285 million to settle the SEC's charges, without admitting or denying wrongdoing. The SEC accepted this settlement. But federal judge Jed Rakoff rejected it, writing on November 28, 2011 that "there is little real doubt that Citigroup contests the factual allegations of the [SEC's] Complaint."
Today, it's not just regular folks who feel apprehensive about the state of financial regulation and enforcement. Even former SEC top dogs fear that our regulatory system is failing us.
Last year, former SEC Chief Accountant Lynn Turner expressed his concerns to me about "the level of regulatory capture and close ties to the securities industry at the current SEC." And former SEC chair Harold Williams recently told me that "There is a feeling generally that the SEC is not being as aggressive as it ought to be, as enforcement-minded, and that's an unfortunate impression. If it's erroneous, the SEC must dispute it. But I'm not sure they can." The SEC did not respond to a request for comment for this article.
There are also legitimate concerns that regulators like the SEC have become a revolving door for professionals who move to private firms and then use their influence on behalf of those companies at the agency. "We're concerned that the constant movement of SEC employees to and from powerhouse firms, such as Citi, can shape the mindset of employees throughout the agency in a way that benefits SEC-regulated businesses," says Michael Smallberg, an investigator with The Project On Government Oversight (POGO).
POGO has been studying the SEC's revolving door for some time, and their files include cases of individuals who left the SEC, went to work at Citi, and then appeared before the SEC representing Citi. Two cases drawn from POGO's database included Scot Draeger, former counsel to then-Commissioner Roel Campos and now head of the securities practice at the private law firm Bernstein Shur, and Joshua Levine, former senior attorney in the SEC's Enforcement Division and now part of the general counsel's office at Citi.
Other situations are more opaque, and the SEC redacts information in the disclosures. For example, there are filings related to Andrew Lawrence, former senior counsel in the SEC's Enforcement Division, and Tammy Bieber, former attorney-advisor in the SEC's Office of the Chief Accountant. Both went to work at private law firms and were assigned to an SEC-Citi case. An SEC spokesperson would not provide a response regarding what that particular case concerned.
Of course, not all those who move from the SEC to the private sector take advantage of their ties to the agency to encourage special leniency toward their clients. Some SEC alumni use their experience to encourage their clients to meet higher standards.
"The door at the SEC has revolved for a long time, but when you tie that to a sense that the Commission is not aggressive in enforcing its mandate, that's serious," Williams says.
The appeals court is expected to rule soon in the SEC-Citi case. Given the revolving door between the SEC and banks like Citi and the lack of public faith in enforcement, it's important that the trial move forward. If not, maybe it's time to just hang up a sign that says, "For Sale: Justice, Seldom Used."
Eleanor Bloxham is CEO of The Value Alliance and Corporate Governance Alliance (http://thevaluealliance.com), a board advisory firm.
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