(Corrects to say Nicolazzo earlier withdrew as Kolchinsky’s lawyer in sixth paragraph of story published Feb. 29.)
Moody’s Corp. (MCO) must face a lawsuit over claims it slashed the pay of a former analyst and cut his duties after he questioned how his colleagues were rating collateralized debt obligations.
Eric Kolchinsky, the former head of the structured-products group at Moody’s that rated CDOs, claims in his lawsuit that Moody’s retaliated against him after he said it was failing to properly rate the securities. The securities collapsed in value with the spike in home mortgage defaults in 2008.
“Kolchinsky has sufficiently alleged that Moody’s took ‘unfavorable personnel action’ against him after he reported what he believed were potential violations of the federal securities laws,” U.S. District Judge Paul Crotty in Manhattan said in yesterday’s decision.
Crotty didn’t rule on the merits of Kolchinsky’s lawsuit and dismissed some claims, including defamation and intentional infliction of emotional distress. The judge allowed to proceed a claim under the 2002 Sarbanes-Oxley Act that protects employees who report possible violations of securities laws.
“We are extremely pleased that the court dismissed all but one of the plaintiff’s claims, and we are confident that we will prevail on the remaining claim once the court has looked at all of the facts,” New York-based Moody’s said in an e-mailed statement.
Adam Nicolazzo, a lawyer for Kolchinsky before he withdrew from the case Nov. 3 according to court records, didn’t immediately return a phone call yesterday seeking comment on the decision.
The case is Kolchinsky v. Moody’s Corp., 10-cv-06840, U.S. District Court (1071L), Southern District of New York (Manhattan).
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