MOODYS CORP

In January 2017, Moody's Corporation agreed to pay nearly $864 million to settle with the DOJ, 21 states, and the District of Columbia over its ratings of risky mortgage-backed securities and collateralized debt obligations in the years leading up to the 2008 financial crisis. The DOJ received $437.5 million; the remaining $426.3 million was divided among the states.

The DOJ found that starting in 2004, Moody's did not follow its published idealized expected loss standards when rating certain Aaa CDO securities, instead using a more lenient standard without disclosing the change to market participants. In 2005, Moody's expanded this practice to all Aaa CDO securities, and in 2006 formally authorized use of this or an even more lenient standard for all Aaa structured finance securities. The inflated ratings led investors to purchase securities whose credit risk was materially worse than represented. As part of the settlement, Moody's agreed to compliance measures including separating analytic employees from commercial discussions, with the CEO required to certify compliance for at least five years. Moody's admitted no violation of law.