If you haven’t yet seen the movie THE BIG SHORT, you should. It’s based on actual occurrences during the 2007-2008 financial crisis and part of it focuses on the ratings services which refused to downgrade the collateralized debt obligations in order to preserve and increase their customer base with issuers.

This past Thursday, Moody’s Investors won dismissal of a whistleblower lawsuit brought by a former managing directing who accused it of defrauding the U.S. Government by failing to downgrade hundreds of thousands of credit ratings. Ilya Eric Kolchinsky claimed that Moody’s violated the Flse Claims Act by issuing bogus rating for mortgage securities”îjust as depicted in THE BIG SHORT.

U.S. Judge William Pauley in Manhattan did not agree and ruled that Kolchinsky failed to prove that Moody’s caused anyone to submit false payment claims to the government. He also said that he found no basis to conclude that Moody’s caused U.S. officials to give AIG an excessively large bailout or that it caused banks to rely on Moody’s to justify underpaying premiums to the Federal Deposit Insurance Corp.

In his opinion, the Judge waxed poeting writing that Kolchinsky’s “sprawling” lawsuit is a ‘Homeric catalog of ships’ for the 2008 financial crisis.”

It may be that the Judge missed the boat here and that his decision will be appealed to higher ground. It’s not so much that Kolchinsky needed to show that the ratings caused the Government to bail out AIG but rather had the ratings agencies acted sooner and with greater candor, the losses might not have required the massive bailouts and would not have resulted in such large losses. In his Complaint, Kolchinsky alleges that despite clear signs of a deteriorating mortgae market, Moody’s continued to issue inflated ratings, concealing the frauds. The judge did deny Moody’s assertions that the case should be dismissed for using previously disclosed information.

Stay tuned.