By Bernard Vaughan
NEW YORK, Jan 3 (Reuters) - A former analyst at Moody's
Investors Service has agreed to drop a lawsuit that had claimed
the ratings agency tried to discredit him after he questioned
its practices for rating risky mortgage debt, court records
Ilya Eric Kolchinsky and Moody's, a unit of Moody's Corp,
both agreed the case would be dismissed, according to a
Wednesday filing in Manhattan federal court.
Kolchinsky has agreed not to bring further action against
the ratings agency, the court papers show.
"It had gotten to the point where they'd been litigating for
years and he couldn't continue to finance litigating against a
giant like Moody's," Joshua Reisman, Kolchinsky's lawyer, said
on Thursday. "It had taken too much of a toll on him and his
The agreement did not involve any financial settlement, said
Reisman, of law firm Reisman Sorokac in Las Vegas.
Moody's spokesman Michael Adler said the ratings firm was
pleased that Kolchinsky had decided to drop the case.
Kolchinsky, who had been a managing director in Moody's
derivatives group, had claimed in his September 2010 lawsuit
that the company illegally retaliated against him for
questioning its ratings practices, resulting in his suspension
in September 2009. He later testified before the U.S. House
Committee on Oversight and Government Reform during its
investigation of credit rating agencies.
Moody's had fought to have the lawsuit dismissed. In
February 2012, a federal judge dismissed much of the case, but
ruled that Kolchinsky could pursue a claim that the ratings
agency and its parent violated the Sarbanes-Oxley corporate
governance law through cuts in his pay and responsibilities.
Credit raters have faced many lawsuits from investors and
others over methods of assigning high ratings, often "triple-A,"
to risky mortgage debt. This case was unusual because it was
filed by a former employee.
Kolchinsky has since started Kolchinsky Group Inc., an
advisory firm that helps businesses understand and value complex
financial products, according to Reisman.
The case is Ilya Eric Kolchinsky v Moody's Corp et al, U.S.
District Court for the Southern District of New York, No.
Follow us on Twitter @ReutersLegal | Like us on Facebook