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Executive Denies That Moody’s Inflated Ratings

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http://www.nytimes.com/2009/10/01/business...mp;ref=business

The chief credit officer of Moody’s Investors Service told Congress on Wednesday that a former analyst’s accusations of inflated ratings and conflicts of interest at the firm were groundless.

The executive, Richard M. Cantor, testified that Moody’s reviewed the complaints by the analyst, Eric Kolchinsky, who was suspended from his job, and found them to be “unsupported.â€

Mr. Kolchinsky has refused to cooperate with Moody’s inquiry into the matter, Mr. Cantor said.

In his testimony on Wednesday, Mr. Kolchinsky told lawmakers that he believed Moody’s violated securities laws by issuing credit ratings the firm knew to be inaccurate.

“They still went forward and issued the rating,†he told the House Oversight and Government Reform Committee.

The panel’s chairman, Representative Edolphus Towns, Democrat of New York, said the accusations, if true, “indicate troubling behavior†in the credit rating industry.

Another former Moody’s employee, who was responsible for compliance, warned federal regulators in March about what he said were deficiencies in the firm’s monitoring of municipal bonds.

The employee, Scott McCleskey, who was a senior vice president for compliance at Moody’s until he left a year ago, wrote a letter to the Securities and Exchange Commission accusing the firm of a â€lack of meaningful surveillance of municipal securities, contrary to statements by Moody’s to the public and to Congress.â€

Mr. McCleskey told the S.E.C. that he became aware that Moody’s did â€virtually no surveillance†on public finance securities, the debt issued by states, counties, towns and school districts.

When he raised concerns to managers, he said, “My guidance was, to put it politely, ignored.†In fact, at one point last year he and others were told in a meeting that they were forbidden to mention the issue in any e-mail messages or other written form, Mr. McCleskey said.

He was hardly likely to admit they where pulling a fast one was here.

Of course they are impeccable, nothing has turned into a giant turd.

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