Moody’s Must Defend Retaliation Claim

March 9, 2012 by · Leave a Comment
Filed under: Moodys 

U.S. District Judge Paul Crotty said that Ilya Eric Kolchinsky may pursue his allegation that Moody’s violated the Sarbanes-Oxley act by cutting his pay, his responsibilities and eventually suspending him in retaliation for questioning Moody’s rating practices for risky mortgage debt.

Judge Crotty dismissed Mr. Kolchinsky’s other claims: defamation, intentional infliction of emotional distress, and that Moody’s tried to blacklist him from the industry.

Kolchinsky had been a managing director in Moody’s derivatives group. He oversaw ratings for U.S. asset-backed securities collateralized debt obligations. After Moody’s suspended him, Mr. Kolchinsky testified before the U.S. House Committee on Oversight and Government Reform during their investigation of the credit rating agencies.

Moody’s spokesman told Reuters, “We are extremely pleased that the court dismissed all but one of the plaintiff’s claims, and we are confident that we will prevail on the remaining claim once the court has looked at all of the facts.”

Mr. Kolchinsky’s lawsuit is one of many challenging the rating agencies’ methodology that assigned “triple-A” ratings to risky mortgage debt. However, it is one of the rare cases brought by an agency’s former employee.

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