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UPDATE 3-Conn. AG to pressure S&P reforms, revive Moody's probe
February 5, 2015 / 9:38 PM / 3 years ago

UPDATE 3-Conn. AG to pressure S&P reforms, revive Moody's probe

(Updates details of DOJ probe of Moody‘s)

By Joy Wiltermuth

NEW YORK, Feb 5 (IFR) - Connecticut’s attorney general told IFR on Thursday that even with the recent government settlement, the state will continue to pressure Standard & Poor’s to make corporate reforms on its ratings process.

In addition, Connecticut will revive a lawsuit and investigation into Moody’s Investors Service over fraud allegations, said George Jepsen, attorney general for Connecticut.

The original lawsuit was filed in 2010 against Moody‘s.

“Ten years ago, S&P thought its shenanigans were constitutionally protected activity,” Jepsen said. “Now it is clear they are subject to state and federal law.”

Earlier this week, the US Department of Justice announced a US$1.375bn settlement with the government, 19 states and the District of Columbia and S&P over fraudulent misconduct in some RMBS and CDO ratings.

As part of a separate US$77m settlement agreed in January between S&P and the US Securities and Exchange Commission, the rating agency promised to reform parts of its RMBS ratings analytics program that were found lacking.

Making sure those reforms are undertaken - and that S&P clearly separates its analytics from its profit making motives - will be closely watched by the Connecticut AG’s office in the months and years ahead, Jepsen said.

The Wall Street Journal also reported this week that the DOJ is investigating Moody’s over mortgage bond deals it rated in the run up to the financial crisis. The Journal reported that it was not clear whether the probe would result in a lawsuit.

“We sued Moody’s over the same legal theory as S&P,” Jepsen said. “The case was slower to develop, and it was stayed until the S&P matter was concluded.”

In a statement, Moody’s said, “We continue to believe the state’s case is without merit as to Moody‘s.” (Reporting by Joy Wiltermuth; Editing by Jack Doran)

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