That Moody’s investigation in fool I

Sullivan & Cromwell might have pulled a Big Brown on the field for the 2008 Conflicted Bastards (Legal Profession) Stakes, with its retention by Moody’s Investor Services in re: The Great CPDO Ratting Debacle. The press release:

NEW YORK, May 21, 2008 (BUSINESS WIRE)—Moody’s recognizes the seriousness of questions raised by today's Financial Times article concerning the analytical models and methodologies used in our European constant-proportion debt obligation (CPDO) ratings process. The integrity  of our ratings and rating methodologies is extremely important [Is this correct? —Ed]; as such, when the questions were recently raised to us, we retained the law firm of Sullivan & Cromwell and initiated a thorough external review of our European CPDO ratings process. Upon completion of the review, we will promptly take any appropriate actions.

So let’s canter over to Sullivan & Cromwell’s website, where we quickly turn to the bottom of page 10 of Rodgin Cohen’s “overview our significant assignments during 2007.”

Our firm is representing a number of financial institutions and other clients in matters arising out of the subprime lending crisis, including many non-public investigations of events in the subprime securitization market. We also represent clients in several civil lawsuits relating to subprime lending, including Moody’s Investors Service Inc in putative class actions brought by Moody’s stockholders claiming that Moody’s and several of its executives violated federal securities law by failing to disclose that the agency’s subprime ratings were allegedly inflated; and officers and directors of JPMorgan Chase named in derivative litigation relating to subprime assets. [Emphasis added].

Any guesses as to how that “external” investigation is going to work out? Rodgin? Rodgin?

We are honored that our clients entrust Sullivan & Cromwell with their most strategic and critical matters and seek our advice in this challenging and dynamic global economic environment. Our commitment to helping our clients around the world identify and capitalize on opportunities and manage risk has led our firm and our lawyers to continue the tradition of excellence and innovation that long has been the hallmark of its success.

While the auld firm of Thain, Pandit, Blankfein & Fuld debate whether the credit crisis is in its seventh or eighth inning, NakedShorts would suggest an alternative analogy: we’ve done the crime, here comes the cover-up.

Sullivan & Cromwell LLP: 2007 Review
May 12 2008

Moody's Confirms External Review of European CPDO Rating Process
Press release
May 21 2008