We would love to hear from you. Click on the ‘Contact Us’ link to the right and choose your favorite way to reach-out!

wscdsdc

media/speaking contact

Jamie Johnson

business contact

Victoria Peterson

Contact Us

855.ask.wink

Close [x]
pattern

Industry News

Categories

  • Industry Articles (21,155)
  • Industry Conferences (2)
  • Industry Job Openings (35)
  • Moore on the Market (414)
  • Negative Media (144)
  • Positive Media (73)
  • Sheryl's Articles (800)
  • Wink's Articles (353)
  • Wink's Inside Story (274)
  • Wink's Press Releases (123)
  • Blog Archives

  • March 2024
  • February 2024
  • January 2024
  • December 2023
  • November 2023
  • October 2023
  • September 2023
  • August 2023
  • July 2023
  • June 2023
  • May 2023
  • April 2023
  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • November 2010
  • October 2010
  • September 2010
  • August 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010
  • March 2010
  • February 2010
  • January 2010
  • December 2009
  • November 2009
  • October 2009
  • August 2009
  • June 2009
  • May 2009
  • April 2009
  • March 2009
  • November 2008
  • September 2008
  • May 2008
  • February 2008
  • August 2006
  • U.S., States Weigh Suing Moody’s Over Mortgage Ratings

    February 11, 2013 by Aruna Viswanatha and Luciana Lopez

    The U.S. Justice Department and multiple states are discussing also suing Moody’s Corp. for defrauding investors, according to people familiar with the matter, but any such move will likely wait until a similar lawsuit against rival Standard and Poor’s is tested in the courts.

    Inquiries into Moody’s are in the early stages, largely because state and federal authorities have dedicated more resources to the S&P lawsuit, said the sources, who were not authorized to speak publicly about enforcement discussions.

    Moody’s spokesman Michael Adler and Justice Department spokeswoman Adora Andy declined to comment for this story.

    Moody’s in the past has defended itself against similar allegations, including a 2011 congressional report that concluded the major ratings agencies manipulated ratings to drive business.

    The firm previously said Moody’s takes the quality of its ratings and the integrity of the ratings process very seriously. It also said the firm has protections in place to separate the commercial and analytical aspects of its business.

    The U.S. Justice Department filed a $5 billion lawsuit against S&P late on Monday and accused it of an egregious scheme to defraud investors in the run-up to the financial crisis, fueled by a desire to gain more business.

    Shares of McGraw Hill Cos. Inc., which owns S&P, have fallen more than 25 percent since news of the lawsuits. Moody’s shares have fallen about 15 percent, even though it was not named in any of this week’s actions.

    “Don’t think Moody’s is off the hook,” said one law enforcement official.

    Another rival, Fimalac SA’s Fitch Ratings, is unlikely to face similar action, the sources said, since it is a much smaller player in the U.S. ratings industry. The firm also escaped the brunt of scrutiny from congressional investigators.

    In a sign of just how high-stakes the battle is, S&P hired prominent defense attorney John Keker, who has represented everyone from cyclist Lance Armstrong to Enron’s Andrew Fastow.

    S&P said in a statement on Tuesday that the lawsuit is meritless and said it will vigorously defend itself.

    A similar coordinated federal-state action against Moody’s would follow lawsuits two states have already filed against the ratings firm. Connecticut, which led the states in this week’s actions, sued Moody’s and S&P in March 2010.

    In January a state court in Hartford denied the last of the preliminary motions Moody’s had filed to have the case thrown out. That case and the one against S&P are proceeding to trial in the second half of 2014.

    Democratic Senator Richard Blumenthal of Connecticut, who as then-attorney general brought the cases against S&P and Moody’s in 2010, said he found rampant abuse across the credit rating industry.

    “The difference is one of degree and scale rather than essential modus operandi,” Blumenthal said in an interview. “S&P is the largest and they did the most sizeable amount of ratings with the largest profits.”

    CASE THEORY

    Those earlier cases and the more recent ones against S&P are based on a theory that the firms misled investors by stating that their ratings on mortgage products were objective and not influenced by conflicts of interest.

    Instead, the lawsuits contend, the firms inflated ratings and understated risks as the housing bubble started to burst, driven by a desire to gain more business from the investment banks that issued mortgage securities.

    Framing the cases in that manner steers clear of attacking individual ratings, which have largely been shielded under free speech protections. Instead, the focus is on proving false just one statement S&P made – that its ratings were objective.

    The two state cases against Moody’s present evidence that is similar to material in the complaints against S&P.

    According to the Connecticut lawsuit, Moody’s pledged in its code of conduct that its ratings are “not … affected by the existence of, or potential for, a business relationship between (Moody’s) … and the Issuer …”

    “This representation by Moody’s was false and Moody’s knew it,” the Connecticut complaint said.

    In rating a collateralized debt obligation in 2006, for example, the issuer of the deal resisted a rating a Moody’s analyst had determined by arguing that S&P had provided a more favorable rating. Following an exchange with managers, the analyst provided a recommendation that Moody’s “reconsider the previously committed loss coverage levels,” the lawsuit said.

    The lawsuit does not say whether the levels were changed.

    Moody’s has said the Connecticut lawsuit is “without merit”.

    A 2011 Congressional report on the causes of the financial crisis singled out both Moody’s and S&P for blame, because their ratings made the risky mortgage-backed securities that were central to the crisis seem like safe investments.

    The report from the Senate’s permanent subcommittee on investigations, led by Democratic Senator Carl Levin from Michigan, detailed specific pressures at Moody’s to keep investment bank clients happy.

    Managers were evaluated based on their ability to build market share, and former Moody’s employees testified that employees were fired when they challenged senior management with a more conservative approach to rating the securities.

    “The fear was real, not rare and not at all healthy. You began to hear of analysts, even whole groups of analysts, at Moody’s who had lost their jobs because they were doing their jobs, identifying risks and describing them accurately,” former Moody’s senior vice president Mark Froeba testified to the subcommittee.

    PAPER TRAIL

    Despite similar evidence against both companies, people with knowledge of the rating agencies say authorities may have moved first against S&P because of a stronger paper trail against it.

    Richard Greenfield of Greenfield & Goodman, who was part of a suit against Moody’s with a settlement last year that included governance reforms and $4.95 million, said looking at the respective evidence, it does appear that there was more material against S&P.

    “Here you’ve got a very, very good paper trail with S&P,” he said. “If they are not totally smoking gun documents, they are collectively smoking gun documents.”

    The paper trail is important because the kinds of documents involved can help keep a judge from dismissing a case before it gets to trial, said Hillary Sale, a securities law and corporate governance expert and professor of law at Washington University in St. Louis.

    The government’s complaint against S&P includes numerous embarrassing emails, such as one in which an analyst parodies a Talking Heads song “Burning Down the House” to reflect the “boiling over” subprime market.

    “When you have that kind of evidence that looks bad, you don’t want to dismiss the case until you have more discovery,” Sale said. That kind of a paper trail “helps you survive a motion to dismiss.”

    Legal experts say they expect the S&P case might simply be a prelude to more action.

    “It may very well be that the government’s testing their waters and they don’t want to bite off more than they can chew,” said Philip Hilder of Hilder & Associates in Houston, a former federal prosecutor. “Nobody should take these cases lightly.”

    Originally Posted at Insurance Journal on February 8, 2013 by Aruna Viswanatha and Luciana Lopez.

    Categories: Industry Articles
    currency