Moody’s Corporation to pay 864 Million to settle claims over faulty ratings on residential mortgage backed securities

Moody’s Corporation will pay announced that it has reached an agreement with the U.S. Department of Justice (DOJ) and the attorneys general of 21 U.S. states and the District of Columbia to resolve pending and potential civil claims related to credit ratings that Moody’s Investors Servicec credit ratings for Residential Mortgage-Backed Securities (RMBS) and Collateralized Debt Obligations (CDO) during the financial crisis period.

Moody’s stands behind the integrity of its ratings, methodologies and processes, and the settlement contains no finding of any violation of law, nor any admission of liability.

Under the terms of the agreement, Moody’s will pay a $437.5 million civil penalty to the DOJ to resolve potential civil claims asserted under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). The company has also agreed to pay $426.3 million, to be divided among the participating states and the District of Columbia, to resolve pending and potential state civil claims. The financial impact to the Company will be recorded in the fourth quarter of 2016. The estimated impact is an approximate $702 million after-tax charge or approximately $3.62 per share.

The agreement acknowledges the considerable measures Moody’s has put in place to strengthen and promote the integrity, independence and quality of its credit ratings. As part of the resolution, Moody’s has agreed to maintain, for the next five years, a number of existing compliance measures and to implement and maintain certain additional measures over the same period. This agreement is final and is not conditioned on court approval.

Jeffrey A. Newman represents whistleblowers.