Today's Coming Crisis Movie

Monday, August 20, 2012

''Moody's and S&P set to face US fraud claim over ratings''

Moody's Investors Service and Standard & Poor's are to face fraud allegations that they assigned inflated ratings to notes sold to investors, a federal court judge in the United States has ruled.

A case brought by investors including Abu Dhabi Commercial Bank (ADCB) in 2008 alleged negligent representation and breach of fiduciary duty on the part of Morgan Stanley, which originally structured the deal.

Among other plaintiffs is Washington state's King County, which encompasses the city of Seattle.

A US federal judge in New York, Shira Scheindlin, dismissed the fraud claims made against Morgan Stanley but left the door open for fraud cases to be brought against ratings agencies that gave the deal an "investment grade" credit rating.

"Even if Morgan Stanley had actual knowledge that the ratings were false, it could only be liable for aiding and abetting fraud … because the ratings cannot be attributed to Morgan Stanley, the fraud claim against Morgan Stanley is dismissed," the judge said. Read More