OWS AB Motion&AmicusBrief

7/31/2019 OWS AB Motion&AmicusBrief

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IN THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

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U.S. SECURITIES AND :

EXCHANGE COMMISSION, :

Plaintiff-Appellant, :

: No. 11-5227

v. :

:

CITIGROUP GLOBAL MARKETS INC., :

Defendant-Appellant :

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MOTION FOR LEAVE TO FILE AMICUS CURIAE BRIEF IN SUPPORT

OF THE PUBLIC INTEREST

Akshat Tewary, Esq.

1974 State Route 27

Edison, NJ 08817

(732) 287-0080

Attorney for Amicus Curiae

Occupy Wall Street Alternative BankingGroup

May 21, 2012


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MOTION FOR LEAVE TO FILE AMICUS CURIAE BRIEF IN SUPPORT

OF THE PUBLIC INTEREST

The Movant, Occupy Wall Street - Alternative Banking Group (OWS-

AB), hereby requests leave, pursuant to Federal Rule of Appellate Procedure

29(b) and this Courts Local Rule 29.1, to file a brief as amicus curiae in support of

the public interest doctrine in this litigation.

OWS-AB is a group within the New York-based Occupy Wall Street

movement. OWS-AB seeks specific improvements to existing and pending

financial services industry legislation and regulations, in addition to evaluating and

recommending alternative approaches to banking. OWS-AB also seeks to

understand and educate people about the current financial system.

OWS-AB files this amicus brief to express its support for Judge Rakoffs

decision to pursue the relevant facts necessary to determine the adequacy of the

settlement between the SEC and Citigroup (NAND settlement). We agree that

the public interest demands that such facts be thoroughly disclosed and examined.

As advocates for transparency and education regarding the financial crisis and the

financial system, OWS-AB believes that a full review of the facts underlying the

case is crucial to the publics understanding of the current financial environment.

In a case that turns on the public interest, we urge the Court to consider our

viewpoints, which reflect at least some of the opinions of the broader community.


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OWS-AB has no stake in any of the parties to this litigation or the result of

this case, other than an interest in seeking a just and fair development of precedent

as to the confirmation of settlements between financial regulators and the nations

financial institutions.


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CONCLUSION

For the reasons stated above, the Movant requests that the Court grant this

motion and provide standing to file the attached Proposed Brief Of Amicus

Curiae Occupy Wall Street Alternative Banking Group In Support Of The Public

Interest And Against Appellant And Appellee and any other briefs as may be

requested by the Court, including oral argument in this case.

Dated: May 21, 2012 Respectfully submitted,

/s/AKSHAT TEWARY

1974 State Route 27, Edison, NJ 08817

(732) 287-0080


Occupy Wall Street Alternative Banking Group


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No. 11-5227IN THEUNITED STATES COURT OFAPPEALSFOR THE SECOND CIRCUIT

UNITED STATES SECURITIES AND EXCHANGE COMMISSION,Plaintiffs-Appellant-Cross Appellee,

v.

CITIGROUP GLOBAL MARKETS INC.,Defendant-Appellee-Cross Appellant.

Appeal from the United States District Court for the Southern District

of New York in No. 1:11-CV-7387-JSR, Judge Jed S. Rakoff

PROPOSED BRIEF OF AMICUS CURIAE

OCCUPY WALL STREET ALTERNATIVE BANKING GROUPIN SUPPORT OF

THE PUBLIC INTEREST AND AGAINST APPELLANT AND APPELLEE

AKSHAT TEWARY1974 State Route 27, Edison, NJ 08817(732) 287-0080

May 21, 2012 Attorney for Amicus Curiae


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TABLE OF CONTENTS

TABLE OF AUTHORITIES................................................................................. ii

CORPORATE DISCLOSURE STATEMENT...................................................iii

STATEMENT OF INTEREST OF AMICUS CURIAE.................................... iv

SUMMARY OF ARGUMENT.............................................................................. 1

ARGUMENT........................................................................................................... 2

The Circuit Court Should Dismiss these Appeals on Procedural Grounds ...... 2

The Chevron Doctrine is Inapplicable Here ......................................................... 3

The Circuit Court Must not Undermine a District Court's Ability to Assessthe Fairness of a Proposed Settlements Underlying Facts ...................... 5

The Fairness Standard Requires an Analysis of the Underlying Facts .........5

The District Court Held that the Fairness Standard Requires a SufficientFactual Foundation, and not Necessarily Liability .............................6

The Public Interest Militates Against Confirmation of the NAND Settlement 7

The Public Interest Standard is Appropriate .................................................7

The NAND Settlement was not in the Public Interest.....................................7

The NAND Settlement Would Hurt Investors and Undercut the DeterrentEffect of SEC Actions .................................................................... 7

The NAND Settlement Would Obscure the Risky Nature of the Productsin Question in this Case..................................................................9

CONCLUSION...................................................................................................... 15


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TABLE OF AUTHORITIES

CASES

Allied Chemical Corp. v. Daiflon, Inc., 449 U.S. 33, 34 (1980). 3

Caitlin v. United States, 324 U.S. 229, 233 (1945). 2

Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc.,467 U.S. 837 (1984). 3, 4, 6

Curtiss-Wright Corp. v. General Electric Co., 466 U.S. 1 (1980).. 5, 6

eBay, Inc v. MercExchange, L.L.C., 547 U.S. 388 (2006). 5, 7

In re Committee of Asbestos-Related Litigation, 748 F.2d 3 (2d Cir. 1984)... 2

U.S. Secs. and Exch. Commn v. Bank of America Corporation, 653 F. Supp. 2d.507(S.D.N.Y. 2009)..... 1

U.S. Secs. and Exch. Commn v. Citigroup Global Mkts. Inc., No. 11 Civ.7387, slip op. at 15 (S.D.N.Y. Nov. 28, 2011)............................................... passim

STATUTE

28 U.S.C. 1291 (2011)... 2

OTHER AUTHORITIES

Nelson D. Schwartz, Bank to Pay $202 Million To Settle Suit On Mortgages, N.Y.Times, May 10, 2012.,.. 8

Wall Streets Repeat Violations, Despite Repeated Promises, N.Y. Times, Nov. 7,2011.. 8

Yves Smith,ECONned(Palgrave MacMillan 2010).. 12


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CORPORATE DISCLOSURE STATEMENT

Pursuant to Federal Rules of Appellate Procedure 26.1 and 29, the Occupy

Wall Street Alternative Banking Group hereby states that it is not a corporation,

but rather an unincorporated association of individual members, and that therefore:

1. It has no parent corporation.2. There is no publicly held corporation that owns 10% of more of the

association.


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STATEMENT OF INTEREST OF AMICUS CURIAE

Alternative Banking (OWS-AB) is a group within the New York-based

Occupy Wall Street movement.1 OWS-AB seeks specific improvements to

existing and pending financial services industry legislation and regulations, in

addition to evaluating and recommending alternative approaches to banking.

OWS-AB also seeks to understand and educate people about the current financial

system.

OWS-AB files this amicus brief to express its support for Judge Rakoffs

decision to obtain the facts necessary to determine the adequacy of the settlement

between the SEC and Citigroup (NAND settlement). We agree that the public

interest demands that such facts be thoroughly disclosed and examined. As

advocates for transparency and education regarding the financial crisis and the

financial system, OWS-AB believes that a full review of the facts underlying the

case is crucial to the publics understanding of the current financial environment.

In a case that turns on the public interest, we urge the Court to consider our

viewpoint, which reflect at least some of the opinions of broader community

1 No part of this brief was authored by counsel for any party, person, ororganization besides amicus. No party, person, or organization contributed moneyto the preparation or submission of this brief.


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OWS-AB has no stake in any of the parties to this litigation or the result of

this case, other than an interest in seeking a just and fair development of precedent

as to the confirmation of settlements between financial regulators and the nations

financial institutions.

This brief is filed in conjunction with a Motion to Leave to File an Amicus

Brief pursuant to Federal Rule of Appellate Procedure 29(b).


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SUMMARY OF ARGUMENT

This case relates to S.D.N.Y. Judge Jed Rakoffs withholding of his

injunctive imprimatur on a proposed consent judgment between Citigroup and the

SEC (NAND settlement) absent a sufficient demonstration of facts. U.S. Secs.

and Exch. Commn v. Citigroup Global Mkts. Inc., No. 11 Civ. 7387, slip op. at 15

(S.D.N.Y. Nov. 28, 2011) [hereinafter Rakoff Opinion].

A chief concern for Judge Rakoff was that under the NAND settlement,

Citigroup neither admitted nor denied any culpability. This brief's primary goal is

to demonstrate that a full examination of the facts underlying this case, including

the broader impact of the actions of the parties on the financial crisis and the

economy, is a necessary condition for the granting of injunctive relief. In

adjudicating a motion for injunctive confirmation of a proposed settlement, a court

must consider whether the settlement is fair, reasonable, and in the public interest.

U.S. Secs. and Exch. Commn v. Bank of America Corporation, 653 F. Supp. 2d.

507, 508 (S.D.N.Y. 2009).

In their briefs, Citigroup and the SEC have mischaracterized the central

issue in this case as whether the District Court was correct in demanding an

absolute admission of liability as a necessary condition to confirmation, in an

attempt to destroy the hallowed practice of settlement-by-consent-decree. In

reality, this case is simply about whether a district court has the authority to


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demand the adequate production of facts to assess how a proposed consent order

would affect the public interest. A district court does have that authority, which

renders these appeals unripe for review. Further, even if the Court accepts review,

the egregious factual circumstances underlying this case militate against judicial

confirmation of the NAND settlement between Citigroup and the SEC.

ARGUMENT

I. THE CIRCUIT COURT SHOULD DISMISS THESE APPEALS ONPROCEDURAL GROUNDS

The main issue before the court is a factual one: did Citigroup and the SEC

provide sufficient information to merit a confirmation of the NAND settlement

under the applicable (and largely uncontested) standards for injunctions. This

Court has recognized that interlocutory appeals of essentially factual questions are

especially disfavored.In re Committee of Asbestos-Related Litigation, 748 F.2d 3,

5 (2d Cir. 1984). This standard would suggest that the interlocutory appeals of

Appellant and Cross-Appellant are premature.

Interlocutory appeals are furthermore restricted to final decisions of the

district courts. 28 U.S.C. 1291 (2011). A final decision is generally one that

ends the litigation on the merits and leaves nothing for the court to do but execute

the judgment. Caitlin v. United States, 324 U.S. 229, 233 (1945). In this case, the

merits of the NAND settlement have not been conclusively addressed by the


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district court. In fact, Judge Rakoff scheduled a trial on July 16, 2012 for that very

purpose. Granting interlocutory appeals in this case would allow these Appellants

(and other appellants in future cases) to circumvent the normal appeals process.

The SECs petition for a writ of mandamus is likewise inappropriate. The

remedy of mandamus is a drastic one, to be invoked only in extraordinary

situations involving gross abuses of discretion. Allied Chemical Corp. v. Daiflon,

Inc., 449 U.S. 33, 34 (1980). It is hard to argue that an abuse of discretion has

occurred when the district court has not even issued a final decision.

Accordingly, the instant appeals should be denied and the case should be

remanded back to district court for trial on the merits.

II. THE CHEVRONDOCTRINE IS INAPPLICABLE HEREIn its order granting a stay of the district court proceeding (Stay Order),

this Court suggested that Judge Rakoff failed to show deference to the

Commissions decision to settle for the NAND consent judgment. (Stay Order at

9.) The Chevron doctrine indicates that a reviewing court should avoid

substituting its judgment for that of a federal agency, particularly with respect to

discretionary and policy-based matters. Chevron, U.S.A., Inc. v. Natural

Resources Defense Council, Inc., 467 U.S. 837, 866 (1984). This Court concluded

that Judge Rakoff had substituted his own judgment on the merits of the NAND

settlement for that of the Commission. Id.


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We believe that conclusion was erroneous. Chevron deference may have

applied had Judge Rakoff conclusively ruled on whether the NAND settlement was

good policy. However, he did not reach such a conclusion. The Rakoff Opinion

simply found that the standards for an injunction (which include a public policy

component) had not been met, (Rakoff Opinion at 8), while the ultimate issue of

the consent judgments merits, and the reasonableness of such a judgment, were to

be addressed at trial at the district court level. Id. at 15. In fact, in Chevron, the

Supreme Court expressly noted that it is within the purview of a court to determine

whether an agencys choice of outcome is a reasonable one. Chevron, 467 U.S. at

843. Judge Rakoff has not been given an adequate opportunity to make that

reasonableness inquiry. The Rakoff Opinion, at its core, was a simple statement

that more facts were needed, and that a trial was necessary to address that need.

The appropriateness of granting an injunction is a judicial function that is

clearly out of the purview of federal agencies. We do not believe that Chevron can

be construed to require the judicial branch to grant injunctions indiscriminately

whenever a federal agency wishes to include such provisions in a settlement.

Further, Chevron does not obviate a district court judge's power to demand more

facts. Chevron might have applied had Judge Rakoffs order invalidated the

consent judgment outright, but that hypothetical case is not before this Court.


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III. THE CIRCUIT COURT MUST NOT UNDERMINE A DISTRICTCOURTS ABILITY TO ASSESS THE FAIRNESS OF A PROPOSED

SETTLEMENTS UNDERLYING FACTS

A. The Fairness Standard Requires an Analysis of the Underlying Facts

Judge Rakoff determined that a trial was required to assess whether the facts

surrounding the proposed consent judgment met the fairness standard for

injunctive relief. The Stay Order took issue with this determination, suggesting

that a trial was not required since the court was free to assess the available

evidence [at the motion stage itself] and to ask the parties for guidance as to how

the evidence supported the proposed consent judgment. (Stay Order at 11).

However, Judge Rakoff did ask the parties for guidance as to . . . the evidence,

by ordering a trial. Moreover, as confirmed by the Supreme Court in eBay, Inc v.

MercExchange, L.L.C., 547 U.S. 388 (2006),judges must consider the fairness of a

settlement to non-party stakeholders and the public interest, and it appears that

Judge Rakoff found the evidence provided at the motion stage to be inadequate to

assess this question properly.

The Stay Order, by declaring the evidence supplied sufficient, effectively

substituted its own judgment for that of the district court. However, by doing so, it

ignored the normal demarcation of authority between district and appellate courts.

The discretionary judgment of the district court should be given substantial

deference as to factual issues. Curtiss-Wright Corp. v. General Electric Co., 466


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U.S. 1, 10 100 S. Ct. 1460, 1466 (1980). If Judge Rakoff decided that a trial was

necessary to gather sufficient factual evidence to properly assess the actual fairness

of the settlement, that decision should not be second-guessed. The SEC and

Citigroup wish to have their cake and eat it too: they ask this Circuit to deny Judge

Rakoff the requisite deference as a fact-finder, while concomitantly insisting on the

granting of deference to the Commission under the inapplicable Chevron standard.

The Rakoff Opinion posits that the judicial branch cannot assess the fairness

of an injunction to defendants without having some assurance of whether or not the

allegations have any basis in fact. (Rakoff Opinion at 9.) Against this point, the

Stay Order argues that in this particular case, Citigroup is a sophisticated litigant

that freely consented to the settlement. (Stay Order at 10.) However, we suggest

to the Court that this decision may have significant precedential force. Similar

cases in the future may involve less sophisticated litigants, and judges should be

permitted to require a thorough factual review to safeguard their interests.

B. The District Court Held that the Fairness Standard Requires a Sufficient

Factual Foundation, and not Necessarily Liability

The Stay Order appeared to misconstrue Judge Rakoffs decision to mean

that a court can never approve a settlement that represents a compromise. Id. at 12.

In actuality, his decision simply denied the request for immediate confirmation

because of an insufficient factual record. (Rakoff Opinion at 4.) The decision did


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suggest that the settlement seemed inappropriate, but delayed a final ruling on the

issue until after trial. Id. at 15. Thus, in proclaiming that Judge Rakoffs decision

would obviate the possibility of compromise, the Stay Order overstates the breadth

of the lower court decision.

IV. THE PUBLIC INTEREST MILITATES AGAINST CONFIRMATIONOF THE NAND SETTLEMENT

A. The Public Interest Standard is Appropriate

The Supreme Court has confirmed that the public interest must not be

disserved by a permanent injunction. eBay, 547 U.S. at 391. Thus, Judge Rakoff

was entirely justified in considering the public interest in his Decision. The Stay

Order itself confirms that deference to federal agencies does not require a court to

rubber stamp all arguments made by such an agency. (Stay Order at 16.)

B. The NAND Settlement was not in the Public Interest

If this Court fails to dismiss these appeals on procedural grounds, it should

nevertheless hold that the public interest standard was not met, thereby rendering

injunctive confirmation of the NAND settlement inappropriate.

1. The NAND Settlement Would Hurt Investors and Undercut theDeterrent Effect of SEC Actions

For various reasons, financial regulators are loath to pursue criminal

indictments for misconduct. If regulators resort instead to the option of civil suits,

then at the very least they should impose sanctions that have bite, in order to


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effectively deter misconduct. Unfortunately, the settlement here, and NAND

settlements generally, fail to achieve this end. Picayune monetary settlements like

the $285 million wrist-slap presented here fail to provide punishment sufficient to

deter similar conduct in the future. Typically, an injunctive order supporting an

NAND settlement is an empty promise to obey the law next time and is rarely

enforced. Not surprisingly, an analysis by the New York Times found that in the

last 15 years, there have been a minimum of 51 violations of these agreements by

major financial firms. Wall Streets Repeat Violations, Despite Repeated

Promises, N.Y. Times, Nov. 7, 2011, available athttp://tinyurl.com/84unp8e.

Citigroup, with six violations, is one of the top recidivists. See id.

Another option available to the SEC is requiring defendants to make

meaningful admissions. Earlier this year, for instance, Deutsche Bank admitted in

a $202 million settlement with HUD that it lied about the eligibility of loans for

Federal mortgage insurance and repeatedly submitted certificates that were

knowingly or recklessly false. Nelson D. Schwartz,Bank to Pay $202 Million To

Settle Suit On Mortgages, N.Y. Times, May 10, 2012. It seems that the SEC has

inhibitions not shared by other regulators. Specifically, the Commission appears to

have the view that requiring misbehaving entities to admit to wrongdoing is unduly

harsh because that could facilitate private lawsuits. It is puzzling that the SEC is

so exercised about the risk that private parties will become better informed about


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inappropriate behavior by regulated firms, or the risk that private parties might

consequently find it easier to seek redress when they are injured by such firms.

The benefits to Citigroup (avoidance of civil liability) and the SEC (reduced

workload) from this NAND settlement are clear, but the benefit to the public is not.

The NAND settlement is a private agreement that has no collateral estoppel effects

for investors seeking damages from Citigroups actions. Thus, those investors

must relitigate the very issues already before the Court, leading to needless cost

and the expenditure of spare judicial resources. Further, the SEC has admitted that

it may not pass any of the $285 million to investors who suffered losses.

The SECs interest is to settle this case quickly in order to reduce its

workload, given its limited resources. However, the publics interest goes well

beyond the SECs costs. The public has a stake in obtaining a) full transparency as

to the specifics of this case, and b) punishment sufficient to deter abusive conduct

in the future. Thus, the SEC is an imperfect proponent of the public interest, and

its assertions that it represents that interest must be viewed skeptically.

2. This NAND Settlement Would Obscure the Risky Nature of theProducts in Question in this Case

The global financial crisis has caused untold damage since its onset four

years ago. To the extent that this crisis was caused by culpable behavior, as


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opposed to simple accidents, there is a clear public interest in identifying such

behavior and in holding violators accountable in a meaningful way.

We believe that the behavior highlighted in this case was not only

destructive, but also was the tip of an iceberg of similarly destructive behavior.

This NAND settlement forecloses any chance of shedding light on such behavior

and since this case was seen as particularly egregious, the SECs failure to reach

solid conclusions about culpability here can be seen as emblematic of a general

refusal to pursue the publics interest in information and accountability.

The type of instrument at the core of this case has done far more extensive

damage than suggested in any SEC filing to date. The instrument in question was

a particular type of collateralized debt obligation (CDO). Expertise in CDOs is

held among relatively few individuals, the overwhelming majority of whom want

to continue to be employed within the financial services industry and therefore

keep market practices to themselves.

The Citigroup CDO at issue in this case is paradigmatic of the most

destructive aspects of these transactions. The SECs complaint and its related

filing against Citigroup employee Brian H. Stoker identify some of the problems,

but by no means all of them.

One such issue was highlighted in Judge Rakoffs ruling. Citigroup

intended to use the CDO as a vehicle for unloading on investors a hand-picked set


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of assets that was expected to deteriorate. (Rakoff Opinion at 2.) The CDO was

run by a firm (a CDO manager) that was presented to investors as exercising

independent judgment. E-mails cited in the Stoker complaint show that Citigroup

recognized that investors would not have been interested in the deal if they thought

that the CDO manager, far from being independent, was actually (per allegations in

the complaint) colluding with Citigroup to fill the CDO with assets likely to fail.

The SEC filing also mentions that Citigroup placed $92.5 million of risky

tranches from its own CDOs into the CDO at issue. In this way, Citigroup avoided

significant losses on these securities. However, the SEC appears to miss the

significance of this point, and provides no indication that it included this avoidance

of losses in its computation of Citigroups profits from the deal. This fact raises

further questions about the adequacy of the settlement agreed to by the SEC.

The SEC filing clearly describes a relationship (between Citigroup and the

CDO manager) that was less than arms length, and depicts this situation as an

industry practice. The clear implication is that this sort of misrepresentation was

pervasive. However, the SEC does not appear to have thought much about what

the systemic effects of these misrepresentations might be.

Misrepresentations about securities values distort market signals. In this

case, the effects were devastating. Most subprime loans were not retained by

originators, but were sold into securitizations, which in turn issued various classes


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of securities, or tranches with varying protections against losses on the

underlying mortgage loan collateral. See generally, Yves Smith,ECONned

(Palgrave MacMillan 2010). The riskiest tranche, known as the BBB or BBB-

tranche, was most difficult to sell. Since investment banks did not want to retain it,

investor refusal to buy it would constrain demand. Prior to the financial crisis,

BBB tranches were placed increasingly into CDOs, in which 65% to 75% of the

value of the deal would be rated AAA, making it easier to sell to investors.

The creation of a single CDO, by disposing of a significant quantity of

hard-to-sell BBB tranches of subprime bonds, therefore made possible the creation

of a much larger quantity of subprime bonds, and hence also of subprime

mortgages. The widespread use of CDOs sustained the housing market for a time,

but traditional AAA buyers began to back off starting in 2004. Such a drop in

demand would normally have led to a retrenchment in the housing market, causing

the housing bubble to burst at a point where it still had not reached enormous

proportions. However, the desire by investment banks to prop up the lucrative

CDO market led instead to a new innovation: synthetic CDOs.

Synthetic CDOs could be created without a full complement of underlying

subprime housing loans. The place of subprime loans within the structure was

partly taken by investors trying to short the housing market (through the technical

device of credit default swaps (CDS)). As time passed, more and more CDOs


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were expressly created to satisfy the requests of these short investors, and were

consequently packed (with the help of the investment banks and CDO managers)

with the riskiest subprime bonds. Investors were simply told that these CDOs were

faster to tee up than conventional CDOs, but were otherwise the same. The fact

that these CDOs were being created to satisfy the appetite of the shorts, and would

therefore contain the worst BBB exposures, was typically withheld from investors.

This artificially-increased demand for CDOs translated into lower, more

aggressive bids for the underlying mortgage bonds, which lowered mortgage rates

and in turn increased demand for the origination of more mortgage loans. The 2004

decline in mortgage origination reversed, and volumes rose in 2005. In the second

half of that year, demand for the very worst mortgages increased dramatically. As

time went on, the increasing size of the bubble made it certain that what would

have been a minor, if somewhat painful, adjustment in the housing market would

instead grow into a global financial crisis.

Many details of what actually happened remain in darkness. The SEC found

an important piece of the puzzle in its 2010 lawsuit concerning a Goldman

synthetic CDO. This Abacus CDO was used by Goldman to bet against

subprime mortgages more cheaply than if Goldman had had to do so overtly.

Unfortunately, Goldman and the SEC settled the litigation, effectively halting a full

probe of the 25 CDOs in the Abacus program.


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This sad history of regulatory forbearance repeats itself here. The Citigroup

CDO at issue in this case was a hybrid this meant that the CDO included cash

bonds, and simultaneously made it possible (through CDS) to bet against the

housing market. The fact that the security was also a CDO squared meant that it

was a repackaging of approximately sixty bonds issued by other CDOs, which in

turn were backed by fifty to one hundred tranches of MBS bonds, making the

leverage on the mortgage market even greater. It appears that this single CDO

transaction was backed by approximately three thousand MBS bonds which, by a

conservative estimate, were backed by approximately fifteen hundred MBS

transactions. Each MBS transaction contained, on average, over two thousand

mortgage loans, with an average balance of approximately $160,000. Therefore, in

aggregate, the Class V Funding III transaction referenced approximately three

million subprime mortgage loans with an aggregate balance ofaround five

hundred billion dollars. Thus, by allegedly creating the transaction for the

purpose of subsequently shorting it, Citigroup helped create demand for more

CDO and MBS bonds, which, in turn, fueled demand for a massive amount of

additional subprime mortgage loans at a time when the market for such loans

should have been cooling. Consequently, the public damage caused by CDO

vehicles such as Class V Funding III greatly exceeded the monetary losses incurred

by investors in these bonds.


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Obscurity surrounding the CDO market has persisted, despite its gargantuan

size. This obscurity has helped to undermine important reforms of housing

finance. For instance, in 2011 the FDIC proposed securitization reforms which

included a ban on resecuritizations (in practice, on CDOs). Public ignorance about

the role of CDOs in the housing bubble made it easier for banks to oppose this

initiative successfully. The NAND settlement here enables the continuance of this

collective ignorance, to the severe detriment of the public interest.

If there is no public interest in examining the behavior at the heart of the

current financial crisis (which has imposed tremendous costs not just on investors

in affected deals but on innocent bystanders worldwide through unemployment,

austerity, and lower global growth), then nothing meets this standard. If this Court

refuses to send this case to trial, it will have abdicated the role of the judiciary.

CONCLUSION

For the reasons stated above, the merits panel should remand this case for

consideration of the factual circumstances surrounding the NAND Settlement.

Dated: May 21, 2012 Respectfully submitted,/s/AKSHAT TEWARY

1974 State Route 27, Edison, NJ 08817(732) 287-0080


Occupy Wall Street Alternative Banking Group


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CERTIFICATE OF SERVICE

I, Akshat Tewary, hereby certify that on May 21, 2012, I caused theforegoing Proposed Brief of Amicus CuriaeOccupy Wall Street AlternativeBanking Group to be sent as directed by email to [email protected],and sent by email to counsel for each of the parties, as follows:

Counsel for Plaintiff/Appellant/Cross-Appellee SECMichael A. ConleyJeffrey A. BergerSecurities and Exchange Commission100 F Street, NEWashington, DC 20549-4010Tel: 202-551-5127/202-551-5112

Fax: 202-722-9362Email: [email protected], [email protected]

Counsel for Defendant/Appellee/Cross-Appellant Citigroup Global Markets Inc.Brad Scott KarpPaul, Weiss, Rifkind, Wharton & Garrison LLP (NY)1285 Avenue of the Americas

New York, NY 10019Tel: 212-373-2384Fax: 212-373-2384Email: [email protected]

Counsel for Judge RakoffJohn WingLankler Siffert & Wohl LLP500 Fifth Ave33rd Floor

New York, NY 10110Tel: 212-921-8399

Fax: 212-764-3701Email: [email protected]

__/s/____________________Akshat Tewary


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CERTIFICATE OF COMPLIANCE

This brief complies with the type-volume limitation of Federal Rule of

Appellate Procedure 29(d) and 32(a)(7)(B) and Fed. Cir. Rule 32(b). The brief

contains 3533 words, excluding the parts of the brief exempted by Federal Rule of

Appellate Procedure 32(a)(7)(B)(iii).

This brief complies with the typeface requirements of Federal Rule of

Appellate Procedure 32(a)(5) and the type style requirements of Federal Rule of

Appellate Procedure 32(a)(6). The brief has been prepared in a proportionally

spaced typeface using Microsoft Word in 14-point Times New Roman font.

Dated: May 21, 2012 Respectfully submitted,

/s/

Akshat Tewary, Esq.1974 State Route 27Edison, NJ 08817

Attorney for Amicus CuriaeOccupy Wall Street Alternative Banking

Group

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