Legal News

Credit rater monopoly status questioned in pending suit

By Richard Binder

Ron Grassi, who had retired five years ago after a 35-year career as a trial lawyer, is back in the game. setting up a war room in his Tahoe City home to single-handedly take on Standard & Poor's, Moody's Investors Service and Fitch Ratings. He's sued the three credit-rating firms for negligence, fraud and deceit.

Grassi says the companies' faulty debt analyses have been at the core of the global financial meltdown and the firms should be held accountable. Exhibit One is his own investment. He and his wife, Sally, held $40,000 in Lehman Brothers bonds because all three credit raters gave them at least an A rating ? meaning they were a safe investment ? right until Sept. 15, the day Lehman filed for bankruptcy.

Grassi says in his complaint that the raters were negligent for failing to downgrade Lehman Brothers debt. The rating companies haven't yet filed responses.

For details on this and an analysis of how critical a role ratings firms play, click here.

Full post as published by Legal Pad | LA on May 26, 2009 (boomark / email).