Calif. attorney general claims Moody’s won’t cooperate in probe of financial meltdown

Calif. AG claims Moody’s won’t comply with probe

LOS ANGELES — California’s attorney general on Monday accused Moody’s Investors Service of ignoring a subpoena and refusing to provide answers about the credit-rating agency’s role in the worldwide financial meltdown.

“The people of California have the right to know how this credit rating agency got it so wrong and whether it violated California law in the process,” Attorney General Jerry Brown said in a statement.

Brown filed a petition Friday asking Los Angeles County Superior Court to order Moody’s compliance with a subpoena issued last fall.

Brown is investigating whether Moody’s, Standard & Poor’s and Fitch Ratings gave high credit ratings to securities backed by risky subprime mortgages and whether they profited from inaccurate ratings.

When the value of the investments collapsed, the agencies downgraded thousands of securities, contributing to hundreds of billions of dollars in bank losses and write-downs that threw the world economy into a tailspin.

The subpoenas ordered Moody’s and the other agencies to provide documents and information about their ratings practices or show why they are unable to provide the data.

Moody’s filed a 69-page objection to the subpoena in January, arguing that the subpoena was vague and too broad, and that the state lacked jurisdiction to issue a subpoena about federally regulated matters.

However, Moody’s remains committed to working with Brown’s office to provide documents, Moody’s spokesman Michael Adler said Monday.

“In fact, Moody’s has already provided the attorney general with tens of thousands of pages of documents in response to his requests and we are continuing to provide additional materials,” Adler said. “We will maintain our ongoing dialogue with the attorney general to resolve the concerns he raised today.”

However, Brown contended that Moody’s has refused to provide written answers under oath to any of the 60 questions in the subpoena.

“While Moody’s has produced some documents, Moody’s has not produced all responsive documents,” Christine Gasparac, Brown’s press secretary, said in a statement.

Brown’s office has not determined whether it needs to file similar petitions against Standard & Poor’s and Fitch Ratings, Gasparac said.

California’s probe follows similar investigations in other states.

In July, the California Public Employees’ Retirement System sued Moody’s, Fitch and S&P, saying they lured the fund into bad investments. CalPERS, the nation’s largest public pension fund, blames them for more than $1 billion in investment losses.