Ex-S&P Employee Sues to Block SEC Action in Ratings Probe

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Barbara Duka, the former co-leader of Standard & Poor’s commercial mortgage-backed securities unit, sued to block the Securities and Exchange Commission from bringing an administrative action against her in its probe of the company’s method for rating bonds.

Duka said in a complaint filed today in Manhattan federal court that she testified in August as part of the SEC’s probe of whether the firm bent ratings criteria to win business. She said the agency told her lawyers it will decide as soon as Jan. 20 whether to bring an action against her. She wants to block the SEC from filing a case because an administrative action may be based on hearsay and would limit her access to evidence.

“Were Ms. Duka to fail to prevail in an administrative proceeding, the damage could be severe and irreversible,” according to her complaint. “The result would be public, thus damaging her reputation.”

Duka joined S&P in 1998 and eventually oversaw the group which performed ratings surveillance of previously issued and rated securities, according to her complaint. She left the company in 2012.

Catherine Mathis, a spokeswoman for S&P’s parent, New York-based McGraw Hill Financial Inc., and Florence Harmon, an SEC spokeswoman, declined to comment on the lawsuit.

Duka said in her complaint that she and other members of her group acted properly. She said they “reasonably believed” that S&P’s change in methodology was “analytically correct.”

The case is Duka v. SEC, 15-cv-00357, U.S. District Court, Southern District of New York.