Moody’s has most employees leaving through revolving door


Moody's credit rating service — one of the major credit rating agencies that was cited as a contributor to the 2008 financial meltdown — has more employees go through the revolving door to work at companies they used to rate than any other credit rating agency, according to new Securities and Exchange Commission (SEC) filings required under the Dodd-Frank financial law.

Eighty-two Moody's employees have moved on to jobs at big banks such as Credit Suisse, Morgan Stanley, and Bank of America over the past five years, according to the filings, which are available here. This is nearly four times as many revolving door employees as reported by Standard & Poor's, the other major credit rating agency and the firm with the next highest number of employees going through the revolving door.

The most prominent Moody's employee to quit for work at a private firm appears to be Pierre Cailleteau, who left his job as global head of sovereign ratings at Moody's to start working in September 2010 at Lazard, an asset management and financial advisory company. Prior to working at Moody's, Cailleteau worked in the public sector at the Financial Stability Board, the International Monetary Fund, and for the Bank of France.

SEC filings do not include names of employees, and Moody's would not confirm Cailleteau was the employee in question, saying that it does not comment on personnel matters. But Cailleteau's departure was widely reported in the financial press at the time, and correlates with SEC filings showing a senior employee who supervised credit ratings departing as of late August 2010 for Lazard. Lazard also would not confirm whether Cailleteau was the revolving door employee in question, but the company did verify that he started at Lazard on Sept. 6, 2010.

Lazard has had a rocky relationship with Moody's ratings during the past several years. The company had a positive outlook Ba1 rating in 2005 from Moody's. That rating dipped down to stable in 2008 and then dipped even lower to negative in 2009. Any credit ratings on the Ba scale are said to have questionable credit quality. The higher the number next to the "Ba," the worse the rating. 

In May of 2010, Lazard was downgraded by Moody's to a stable Ba2 rating. On Oct. 6 of this year, Lazard received a slightly higher rating from Moody's of a positive Ba2 rating.

The SEC filings detail whether the person in question was a senior officer, and if he or she either participated in or supervised a credit rating of the given company. Only four employees in the data were described as senior officials and only four supervised credit ratings. The rest at least participated in credit ratings.

While the SEC collects the names of these employees, it deletes them from the public records because of privacy concerns. The Sunlight Foundation has filed a Freedom of Information Act (FOIA) request to obtain these names. The credit rating agencies are supposed to report on revolving door employees to the SEC as they happen, and the SEC updates its website within days of getting the reports from the agencies.

These particular credit rating agencies, designated by the SEC as "Nationally Recognized Statistical Rating Organizations" or NRSROs, played a hand in the financial crisis by giving inflated ratings to assets that turned out to be toxic. One of the inherent conflicts was that while ratings agencies were required to provide accurate ratings, they were depending on the firms selling the assets they were rating for payment. These filings reveal another potential conflict–the very people doing the ratings might seek employment at the same companies they were rating.

According to the filings, Moody's employees went to more than 60 different companies. The Bank of Tokyo and Credit Suisse hired the most employees from Moody's, according to this data. They each hired at least five revolving door employees from Moody's.

The credit rating agency revolving door reporting process is different from the one requiring the SEC to reveal when its own employees leave for the private sector. There, the onus is on the employees to file such reports, and their names are included in the filings. In the case of employment transition reports with credit rating agencies, the responsibility to report lies on the agencies rather than the employees, and the agencies must only report when “they know (or can reasonably be expected to know) of an employee that has gone to work for a private firm that he or she helped rate.

A recent SEC review of credit rating agencies noted that they had "some weaknesses" in plans to implement new policies regarding the revolving door. There were also "some instances where the written policies and procedures may not cover all of the requirements" mandated by law. The report noted that a more thorough examination of NRSRO policies on the revolving door would have to wait because the requirements are relatively new.



What: "Revolving door" data for credit rating agencies designated by the SEC as Nationally Recognized Statistical Rating Organizations (NRSROs). Agencies must file a report when an employee leaves for a company that received a credit rating from the NRSRO within the previous five years. Records show names of NRSROs and new employers, but exclude employee names.

Where: On the SEC's website here.

Availability: Employee names are not included to protect the privacy of those working for a private company, but the Sunlight Foundation has a pending Freedom of Information Act (FOIA) request with the SEC to try to obtain those names. The SEC updates the data within days of receiving information from credit rating agencies, which are supposed to try to report their revolving door employees as each employee leaves. 

Usability: Data are listed on the SEC's website. There is no option to download the data; however, it is possible to copy and past it into a spreadsheet for analysis.