Ex-S&P Executive Duka Opens Defense of SEC Trial Over Ratings

  • Agency sued claiming she skewed ratings to win business
  • Duka challenged system of assigning cases to in-house judges

Barbara Duka, the former co-leader of Standard & Poor’s commercial mortgage-backed securities unit, began defending against fraud charges that she helped skew the ratings on securities to win business for the company.

Duka went on trial Monday in a Securities and Exchange Commission proceeding in Manhattan. She denies the agency’s claims that she and her group manipulated ratings on mortgage-backed securities to help attract clients. Duka joined S&P in 1998 and eventually oversaw the group which performed ratings surveillance of previously issued and rated securities, according to court papers. Duka left S&P in 2012.

Like Patriarch Partners LLC founder Lynn Tilton, whose in-house fraud trial just wrapped up, Duka tried unsuccessfully to have her case heard in federal court, where the rules provide defendants with more protections.

Duka and Tilton both claimed the SEC’s method for selecting hearing officers conflicts with the U.S. Constitution. A federal appeals court said they must defend their cases in the internal SEC proceedings before bringing a challenge to the process. Critics of the in-house system, which considers hundreds of cases a year, say it is unfair to defendants, particularly in complex cases.

A decision in the Tilton case is expected next year.

The case is In the Matter of Barbara Duka, 3-16349, Securities and Exchange Commission (Manhattan).

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