NEW YORK (Reuters) - A former analyst at Moody’s Investors Service has agreed to drop a lawsuit that had claimed the ratings agency tried to discredit him after he questioned its practices for rating risky mortgage debt, court records show.
Ilya Eric Kolchinsky and Moody‘s, a unit of Moody’s Corp (MCO.N), both agreed the case would be dismissed, according to a Wednesday filing in Manhattan federal court.
Kolchinsky has agreed not to bring further action against the ratings agency, the court papers show.
“It had gotten to the point where they’d been litigating for years and he couldn’t continue to finance litigating against a giant like Moody‘s,” Joshua Reisman, Kolchinsky’s lawyer, said on Thursday. “It had taken too much of a toll on him and his family.”
The agreement did not involve any financial settlement, said Reisman, of law firm Reisman Sorokac in Las Vegas.
Moody’s spokesman Michael Adler said the ratings firm was pleased that Kolchinsky had decided to drop the case.
Kolchinsky, who had been a managing director in Moody’s derivatives group, had claimed in his September 2010 lawsuit that the company illegally retaliated against him for questioning its ratings practices, resulting in his suspension in September 2009. He later testified before the U.S. House Committee on Oversight and Government Reform during its investigation of credit rating agencies.
Moody’s had fought to have the lawsuit dismissed. In February 2012, a federal judge dismissed much of the case, but ruled that Kolchinsky could pursue a claim that the ratings agency and its parent violated the Sarbanes-Oxley corporate governance law through cuts in his pay and responsibilities.
Credit raters have faced many lawsuits from investors and others over methods of assigning high ratings, often “triple-A,” to risky mortgage debt. This case was unusual because it was filed by a former employee.
Kolchinsky has since started Kolchinsky Group Inc., an advisory firm that helps businesses understand and value complex financial products, according to Reisman.
The case is Ilya Eric Kolchinsky v Moody’s Corp et al, U.S. District Court for the Southern District of New York, No. 10-6840.
Reporting By Bernard Vaughan; Editing by Martha Graybow and David Gregorio