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Nye Lavalle
Connecticut's Attorney General
Subpoenas Debt-Rating Agencies

Associated Press
October 26, 2007 3:05 p.m.

HARTFORD, Conn. -- Connecticut's attorney general said Friday that he has subpoenaed the nation's three largest debt-rating agencies as part of an investigation into possible anticompetitive practices.

Attorney General Richard Blumenthal confirmed that his office issued subpoenas Oct. 10 to Standard & Poors, Moody's Investor Services and Fitch Ratings Service.

The investigation focuses on whether the credit-rating agencies are using their dominant position to unfairly raise prices or exclude competitors in violation of Connecticut's antitrust laws, he said.

"Assuring debt ratings are honest and untainted is vital to investors, companies and government," Mr. Blumenthal said.

Standard & Poors referred questions to parent company McGraw-Hill Cos., which disclosed the subpoena in its third-quarter report filed with the Securities and Exchange Commission.

"As stated in our 10Q filing, S&P received the subpoena on Oct. 16, and we are responding," said Frank Briamonte, a spokesman for McGraw-Hill.

Messages seeking comment were left with Fitch and Moody's.

Mr. Blumenthal said Friday his investigation is reviewing allegations that some companies rated an issuer's debt against its wishes, then ordered the issuer to pay for the service or face a possible poor rating.

His office also is reviewing whether some credit-rating agencies pressured issuers into exclusive contracts under threat of a downgrade, and whether contracts that offer a discount in return for exclusivity violate Connecticut's antitrust laws by locking out other debt raters.

Credit-rating company executives testified on Capitol Hill last month about the role their agencies played in the subprime mortgage industry's implosion last summer and whether they were affected by conflicts of interest.

Critics have said the rating agencies failed to warn investors of the risks associated with complex mortgage-backed securities, especially those with loans to borrowers with weak credit histories.

Many of those investments have plummeted in value this year.

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