A lawsuit has been filed and is seeking class action status against the credit ratings agency for allegedly not telling investors it assigned excessively high ratings to bonds backed by subprime mortgages. The lawsuit was filed in US District Court in Manhattan on behalf of the Teamsters Local 282 Pension Fund and claims Moody's Corp.'s role in rating the subprime loan securities hurt the rating agency's stock price as the housing sector declined. The lawsuit is seeking class action status for all purchasers of Moody's shares from Oct. 25, 2006, to July 10, 2007.
The suit claims Moody's recklessly disregarded non-public information about how its ratings of the subprime loan securities would affect its financial results and stock price. The suit alleges the New York company's ratings of bonds backed by subprime mortgages, including bonds packaged as collateralized debt obligations, were materially misleading to investors concerning the quality and relative risk of those investments.
