PRESS RELEASE – FOR IMMEDIATE RELEASE
Ilya Eric Kolchinsky v. Moody’s Corporation, Moody’s Investor Service, Inc.
and Raymond McDaniel
United States District Court for the Southern District of New York
Civil Action No.: 10 CV 6840 (PAC)
By Order dated February 27, 2012, United States District Court Judge Paul A. Crotty denied Moody’s Corporation’s, Moody’s Investor Service, Inc.’s (referred to collectively herein as “Moody’s”) and Raymond McDaniel’s motion to dismiss the claim of retaliatory discharge by whistleblower, Ilya Eric Kolchinsky.
In his complaint, Mr. Kolchinsky, a former Managing Director of Moody’s, alleged three separate acts of whistleblowing involving Moody’s ratings of ABS-CDOs, the products that
were responsible for hundreds of billions of dollars of losses at financial institutions, and three corresponding acts of retaliation. Mr. Kolchinsky was constructively terminated from his employment in 2009, after he reported that: 1) Moody’s was filing false reports, and 2) Moody’s actions in connection with its ratings were in violation of the rules and regulations of the Securities and Exchange Commission, and/or federal law relating to fraud against shareholders.
Section 1514A of the Sarbanes-Oxley “Whistle Blower” statute makes it unlawful for certain employers to “discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms or conditions of employment because of any lawful act done by the employee . . . to provide information . . . or otherwise assist in an investigation regarding any conduct the employee reasonably believes constitutes a violation” of certain, enumerated federal laws. 18 U.S.C. § 1514A.
Judge Crotty held that “a plaintiff need not allege termination to state a claim under Section 1514A.” Instead, it is sufficient to show that a plaintiff suffered “a materially adverse change” in his employment status, such as “a decrease in wage or salary, a less distinguished title, a material loss of benefits, significantly diminished material responsibility, or other indices.” (Internal citations omitted.) Accordingly, the Court held that Mr. Kolchinsky “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 and SEC rules.”
The Court’s decision reaffirms the rights of financial analysts, under the Sarbanes-Oxley Act, to fulfill their responsibilities to shareholders and investors, free from the threat of retaliation by senior management. Given Moody’s central role in the financial crisis of 2008, this decision is especially important.
The Court dismissed Mr. Kolchinsky’s defamation and other related claims.
Mr. Kolchinsky is represented by Joshua H. Reisman of Reisman Sorokac in Las Vegas, Nevada, and Todd J. Krouner and Diana M. Carlino of the Law Office of Todd J. Krouner in Chappaqua, New York.
A copy of Judge Crotty’s decision is available here. For further information, please contact Joshua H. Reisman at (702) 727-6258, or Todd J. Krouner at (914) 238-5800.
If you or a loved one has been retaliated against, terminated or demoted, as a result of speaking out, or because of age, sex, religion, national origin, race or disability, you should promptly contact an attorney with experience in employment law. The Law Office of Todd J. Krouner has a proven track record of helping victims of employment discrimination. To determine if you have a strong case, contact us for a free consultation at (914) 238-5800.