Moody’s Wins Dismissal of Pension Fund’s Securities SuitChristie Smythe
Moody’s Corp. won dismissal of a lawsuit by a pension fund claiming the credit ratings firm made false statements about its independence and objectivity.
U.S. District Judge George B. Daniels in Manhattan found that the Teamsters Local 282 Pension Trust Fund failed to establish that Moody’s violated securities laws, according to a ruling issued today.
The pension fund, an investor in New York-based Moody’s, argued the company succumbed to conflicts of interest when it assigned faulty ratings to structured securities products before the financial crisis.
The fund alleged that Moody’s stock dropped after questions arose about the mortgage-backed securities and other products the firm had rated highly. In about 2007, Moody’s and other ratings companies began downgrading those securities.
“Plaintiffs must proffer some evidence demonstrating that Moody’s specific alleged misrepresentations caused the materialization of the risk that Moody’s rating practices were unsustainable,” Daniels wrote. “They fail to do so.”
The case is In re Moody’s Corporation Securities Litigation, 07-8375, U.S. District Court, Southern District of New York (Manhattan).