Moody’s Reaches Settlement with U.S. Department of Justice, 21 U.S. States and District of Columbia
January 13 2017 - 7:05PM
Business Wire
- Agreement removes significant legacy
legal risk and contains no finding of any violation of law
- Resolves pending and potential civil
claims related to certain credit ratings
Moody’s Corporation (NYSE:MCO) announced today 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 Service assigned to certain
structured finance instruments in the financial crisis era. The
agreement also relates to certain statements made in connection
with Moody’s structured finance rating methodologies and procedures
during the same period.
After careful consideration, Moody’s determined that the
agreement, which removes significant legacy legal risk and avoids
costs and uncertainty associated with continued investigations and
litigations, is in the best interest of the company and its
shareholders. 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.
ABOUT MOODY’S CORPORATION
Moody's is an essential component of the global capital markets,
providing credit ratings, research, tools and analysis that
contribute to transparent and integrated financial markets. Moody’s
Corporation (NYSE: MCO) is the parent company of Moody's Investors
Service, which provides credit ratings and research covering debt
instruments and securities, and Moody's Analytics, which offers
leading-edge software, advisory services and research for credit
and economic analysis and financial risk management. The
corporation, which reported revenue of $3.5 billion in 2015,
employs approximately 10,900 people worldwide and maintains a
presence in 36 countries. Further information is available at
www.moodys.com.
“Safe Harbor” Statement under the
Private Securities Litigation Reform Act of 1995
Certain statements contained in this release are forward-looking
statements and are based on future expectations, plans and
prospects for Moody’s business and operations that involve a number
of risks and uncertainties. The forward-looking statements in this
release are made as of the date hereof, and the Company disclaims
any duty to supplement, update or revise such statements on a
going-forward basis, whether as a result of subsequent
developments, changed expectations or otherwise. In connection with
the “safe harbor” provisions of the Private Securities Litigation
Reform Act of 1995, the Company is identifying certain factors that
could cause actual results to differ, perhaps materially, from
those indicated by these forward-looking statements. Those factors,
risks and uncertainties include, but are not limited to, the
current world-wide credit market disruptions and economic slowdown,
which is affecting and could continue to affect the volume of debt
and other securities issued in domestic and/or global capital
markets; other matters that could affect the volume of debt and
other securities issued in domestic and/or global capital markets,
including regulation, credit quality concerns, changes in interest
rates and other volatility in the financial markets such as that
due to the U.K.’s referendum vote whereby the U.K. citizens voted
to withdraw from the EU; the level of merger and acquisition
activity in the U.S. and abroad; the uncertain effectiveness and
possible collateral consequences of U.S. and foreign government
initiatives to respond to the current world-wide credit market
disruptions and economic slowdown; concerns in the marketplace
affecting our credibility or otherwise affecting market perceptions
of the integrity or utility of independent credit agency ratings;
the introduction of competing products or technologies by other
companies; pricing pressure from competitors and/or customers; the
level of success of new product development and global expansion;
the impact of regulation as an NRSRO, the potential for new U.S.,
state and local legislation and regulations, including provisions
in the Financial Reform Act and regulations resulting from that
Act; the potential for increased competition and regulation in the
EU and other foreign jurisdictions; exposure to litigation related
to our rating opinions, as well as any other litigation, government
and regulatory proceedings, investigations and inquires to which
the Company may be subject from time to time; provisions in the
Financial Reform Act legislation modifying the pleading standards,
and EU regulations modifying the liability standards, applicable to
credit rating agencies in a manner adverse to credit rating
agencies; provisions of EU regulations imposing additional
procedural and substantive requirements on the pricing of services;
the possible loss of key employees; failures or malfunctions of our
operations and infrastructure; any vulnerabilities to cyber threats
or other cybersecurity concerns; the outcome of any review by
controlling tax authorities of the Company’s global tax planning
initiatives; exposure to potential criminal sanctions or civil
remedies if the Company fails to comply with foreign and U.S. laws
and regulations that are applicable in the jurisdictions in which
the Company operates, including sanctions laws, anti-corruption
laws, and local laws prohibiting corrupt payments to government
officials; the impact of mergers, acquisitions or other business
combinations and the ability of the Company to successfully
integrate acquired businesses; currency and foreign exchange
volatility; the level of future cash flows; the levels of capital
investments; and a decline in the demand for credit risk management
tools by financial institutions. These factors, risks and
uncertainties as well as other risks and uncertainties that could
cause Moody’s actual results to differ materially from those
contemplated, expressed, projected, anticipated or implied in the
forward-looking statements are described in greater detail under
“Risk Factors” in Part I, Item 1A of the Company’s annual
report on Form 10-K for the year ended December 31, 2015, and
in other filings made by the Company from time to time with the SEC
or in materials incorporated herein or therein. Stockholders and
investors are cautioned that the occurrence of any of these
factors, risks and uncertainties may cause the Company’s actual
results to differ materially from those contemplated, expressed,
projected, anticipated or implied in the forward-looking
statements, which could have a material and adverse effect on the
Company’s business, results of operations and financial condition.
New factors may emerge from time to time, and it is not possible
for the Company to predict new factors, nor can the Company assess
the potential effect of any new factors on it.
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version on businesswire.com: http://www.businesswire.com/news/home/20170113005785/en/
Moody's CorporationSALLI SCHWARTZGlobal Head of Investor
Relations and
Communications212.553.4862sallilyn.schwartz@moodys.comorMICHAEL
ADLERSenior Vice PresidentCorporate
Communications212.553.4667michael.adler@moodys.com
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