Wednesday, September 30, 2009
Two former Moody's executives, in testimony at a House Oversight and Government Reform Committee hearing, said workers were encouraged to remain silent and cover up evidence of alleged improper practices in assigning and monitoring credit ratings.
The two "described a culture of secrecy, a place where putting things in writing was frowned upon," said Rep. Edolphus Towns, the Democratic chairman of the panel. "Can you imagine working at a place where the very act of writing a memo or sending an email is suspect?"...
Two former Moody's executives -- Scott McCleskey and Eric Kolchinsky -- testified that senior managers were willing to silence employees who raised concerns about the ratings process or compliance efforts.
McCleskey said that while he was the head of compliance at Moody's, he voiced concerns that the firm was not properly monitoring ratings on municipal debt. McCleskey, who was dismissed by Moody's in 2008, said he was instructed not to mention the issue in e-mails or writing.Kolchinsky, a Moody's managing director who was recently suspended by the firm, said senior managers pushed revenue over ratings quality and were willing to fire employees who disagreed.
The congressional testimony can be read in full here.
Previously, I've pointed out that employees of the big 3 ratings agencies admitted that they had sold their soul for higher fees, that the rating agencies took "bribes" for higher ratings, and that Moody's argued in court that anyone who believed its ratings was an idiot.
The ratings companies also admitted that they didn't fire the analysts who gave AIG and Bear Stearns AA or higher ratings up until the moment they went bankrupt.
Reuters also notes:
Rep. Edolphus Towns, the Democratic chairman of the panel ... also said his committee would investigate why the Securities and Exchange Commission failed to act on a March 2009 letter sent by Moody's former senior vice president of compliance. The executive urged the SEC to take a closer look at Moody's weak compliance department and ratings process.