7/2/12, "Unsealed Documents Expose Morgan Stanley Forcing Rating Agencies To Inflate Ratings," Zero Hedge
"By now it should be very clear going forward all the things that actually make a free and fair market are forever gone, and that without endless fraud and manipulation by all the market participants who realize that anyone defecting the ponzi group means immediate and terminal losses for all, and all those calls for an S&P 400 would actually prove to be overly optimistic.
From Bloomberg:"...
7/2/12, "Morgan Stanley Pressed S&P to Inflate Ratings, Investors Say," Bloomberg
"Morgan Stanley successfully pressured Standard & Poor’s and Moody’s Investors Service Inc. to give erroneous investment-grade ratings in 2006 to $23 billion worth of notes backed by subprime mortgages, investors claimed in a lawsuit, citing documents unsealed in federal court.
...The unsealing of the internal documents from Moody’s and Standard & Poor’s came in one of the largest ratings lawsuits to emerge from the 2008 financial crisis. The lawsuit was filed in 2008 by Abu Dhabi Commercial Bank, based in the United Arab Emirates, and Washington’s King County, which includes Seattle....
U.S. District Judge Shira Scheindlin in Manhattan ordered the documents unsealed because the plaintiffs are using them to oppose motions presented by Moody’s and Standard & Poor’s for summary judgment to dismiss the case.
Scheindlin has previously rejected Moody’s, S&P’s and Morgan Stanley’s bid to have the suit thrown out on the grounds that the economic downturn, not the defendants’ misconduct, was to blame for investors’ losses on the notes.
She also rejected claims the ratings companies couldn’t be held liable for their ratings on the Cheyne notes because of First Amendment protections covering free speech under the U.S. Constitution.
Scheindlin concluded the First Amendment didn’t provide a basis for throwing out the lawsuit because the rating firms’ comments were distributed privately to a select group of investors, and not to the general public. The judge said the securities received the “highest credit ratings ever given to capital notes,” according to court filings.
In December, after a procedural ruling in New York state court, Scheindlin also allowed the plaintiffs to reinstate their claim that the ratings firms are guilty of negligent misrepresentation. This would require the plaintiffs to show only that Moody’s and Standard & Poor’s should have known that the ratings were wrong, as opposed to proving they knowingly and fraudulently disregarded facts at their disposal."...
=========================
7/2/12, "Hot new filing claims internal docs show rating agencies lied on MBS," A. Frankel, newsandinsight.thomsonreuters.com
"In a series of filings in federal court in Manhattan, Abu Dhabi Commercial Bank and its lawyers at Robbins Geller Rudman & Dowd disclosed thousands of pages of internal communications and deposition transcripts to back their claims that S&P and Moody's are liable for fraud and negligent misrepresentation in connection with their rating of a structured investment vehicle underwritten by Morgan Stanley. Based on a declaration by plaintiffs that accompanied the documents, a huge percentage of the newly disclosed material has never previously been seen by the public -- and a good many of the documents deal not just with the Morgan Stanley SIV but more broadly with the rating process inside S&P and Moody's at a time when the two leading agencies were swamped with mortgage-backed securities to rate.
Robbins Geller also provided a helpful CliffsNotes version of the evidence in the form of an unredacted response to the defendants' motion for summary judgment. (A redacted version was filed in February, with page upon page blacked out.) This is a hot filing. Abu Dhabi quotes deposition testimony from "S&P's most senior quantitative analyst in Europe," for instance, that says "the ratings of (the SIVs) were inappropriate because the ratings of the underlying assets were not appropriate. So it leads to the conclusion that they should not have been rated."...
Morgan Stanley, according to the plaintiffs' filing, bears at least as much blame as the rating agencies: The bank allegedly wrote the Moody's report on the SIV and read the S&P report before it was released to investors. The summary judgment opposition points to evidence that Morgan Stanley pressured the rating agencies to apply methodology that didn't suit the securities and to ignore the paucity of historical data in order to grant the SIV a rating it didn't deserve. By sending a supposedly "threatening" email to an S&P higher-up when an analyst proposed granting the SIV a BBB rating, Morgan Stanley boosted the rating to an A, the plaintiffs assert. In support, they quote an email from Morgan Stanley exec Greg Drennan, who had sent the allegedly menacing email: The bank's efforts, Drennan wrote, "did get us the rating we wanted in the end.""...via Zero Hedge, Free Rep.
.
No comments:
Post a Comment