The SEC's practice of allowing investigation targets to settle fraud charges without admitting or denying that they actually did anything wrong has been the subject of lots of controversy lately.

Judge Jed Rakoff has made it an issue in his review of the SEC-Citigroup settlement, for example. From the SEC's perspective, the practice is understandable. The agency cannot hope to police all cases of fraud. What it is really doing is sampling. And when it locks onto a winning case, it pretty much has to ink a settlement. If it took every case to court, it would be overwhelmed. It's basically going for symbolic victories. The conventional wisdom has been that companies are much more likely to settle if they do not have to admit guilt. Admitting guilt would open the floodgates of private litigation, many argue.

This all makes sense until you ponder the Justice Department's and the SEC's settlements with Wells Fargo over bid-rigging charges at Wachovia. In the SEC case, Wells Fargo did not admit guilt. But in the separate settlement with the Justice Department, the bank said it "admits, acknowledges and accepts responsibility for" manipulating "the bidding process in the sale of derivatives on tax-exempt bonds to institutional investors like cities, hospitals and pension plans over a six-year period ending in 2004," notes the New York Times.

Wouldn't that also open the flood gates of private suits? This is baffling lots of legal experts.

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