US Justice Department probes Moody’s business tactics
The US Justice Department has started a preliminary investigation into the activities of the Moody's credit rating agency, suspecting it of fraud related to mortgage deals, RIA Novosti reported referring to the Wall Street Journal.
Justice Department officials have met with multiple former executives of Moody's Investors Service in recent months to find out whether the company compromised standards to win business in the build-up to the 2008 financial crisis, The Wall Street journal reported Sunday, citing "people familiar with the situation".
According to the same sources, the Justice Department investigation is its earliest stages and it is not yet clear whether it will end in a lawsuit. A Moody's spokesman asked to comment on the issue by the Wall Street Journal declined to answer.
New York-based Moody's is the world's second-largest rating agency after Standard & Poor's (S&P), which agreed to pay a settlement amounting to $77 million last month for violating several federal security laws.
According to the US Securities and Exchange Commission (SEC), S&P had deliberately inflated grades of risky mortgage securities. The rating agency is now banned from grading bonds backed by commercial mortgages for one year.