Judge's Message to Rating Agencies: Free Speech Not Freedom to Defraud

On Sept. 2, US District Court Judge Shira Scheindlin ruled that a lawsuit filed by institutional investors alleging fraud by Moody’s (MCO), S&P, and Morgan Stanley (MS) may go forward, dismissing the rating agencies’ traditional First Amendment, freedom of speech defense. MCO and McGraw-Hill (MHP), which owns S&P, declined when the ruling hit the wires, on fears that without the free speech defense the agencies could be open to unlimited legal liability.

The plaintiffs, Abu Dhabi Commercial Bank and King County, Washington (which includes Seattle) purchased notes issued by the then AAA-rated Cheyne Structured Investment Vehicle (SIV) beginning in 2004. Cheyne went bankrupt only three years later, and that bankruptcy helped spark the money market crisis of 2007.

On the face of it, the investors have cause for anger. Triple-A ratings traditionally mean: safe to buy, forget, and clip the coupons. Having a triple-A issue go bankrupt at all is an embarrassment for the agencies. Having the issue go from triple-A to bankrupt so quickly means the agencies blew the call about as badly as they possibly could. The court will decide if the blown call happened through incompetence or something worse.

Here’s another reason why I think the investors have a case: the rating agencies have access to gobs of confidential information that other investors don’t see. Their analysts can ask an issuer just about any question and get the answers they want. So the agencies ought to have known, and certainly had every resource to find out, about the flawed mortgage backed securities (MBS) that were folded into the collateralized debt obligations (CDOs) that Cheyne owned. Nonetheless the agencies stamped the junk with a triple-A.

The agencies claim that they relied on models of the housing market that didn’t allow for a nationwide decline in home prices, as opposed to a regional one. Lame as it sounds now, that model had some merit (though not that much), before, say, 2003 when mortgage lending standards started to deteriorate. But if anyone was in a position to know that the game had changed, it was the agencies. They could have demanded sample loan files to get a feel for the underlying collateral, and no doubt the investors will ask about this in court. Loan files are normally highly confidential, kept between the borrower and lender, but that is exactly the kind of thing that the rating agencies can see (and bank examiners certainly do see) but outside analysts can’t.

The agencies’ bank analysts also should have known about deteriorating home loan underwriting. After all, the agencies also rate bonds issued by banks. If I were representing the investors, I’d ask if the agencies’ bank analysts had learned about weak home loan collateral, and if they talked to the analysts in the groups who rated SIVs. You’d think that someone, somewhere in S&P or Moody’s had some idea about this. Yet they continued to bless structured products with triple-A ratings as quickly as the bonds could get cranked out.

My guess is, a fair number of people at S&P and Moody’s knew quite well that the mortgage markets had gone bad. After all, some colorful internal S&P e-mails came out in October 2008. One of them mentioned a “house of cards” and another, that “a cow could come up with this structure and we would rate it.” But who would dare raise a stink, when the agencies’ structured product groups were making the real money (more on that below)? The court will have to decide whether such general awareness in the firms evidenced fraud or not.

The deterioration in loan underwriting standards enabled the housing bubble and made a subsequent collapse almost inevitable. Back in the ‘Sixties and ‘Seventies, Fannie Mae (FNM) and Freddie Mac (FRE) ran large databases on loan experience through their computers, and figured out what a sound home mortgage loan looked like. From this exercise came the guidelines that many of us grew up with: 10-20% down, a maximum of 28-33% of income needed to service debt, and a stable work history, among other things.

When Fannie Mae and Freddie Mac’s standards ruled, that meant that in the nation as a whole, house prices had to be related to borrowers’ ability to pay the loans. The advent of liar loans with initial teaser rates, and similar unsound products, broke the relation between house prices and income. Therefore, at least for a time, there was almost no limit to how high prices could go. Again, the rating agencies were in as good a position as anyone to know about this problem early on.

Contrast the recent bubble to the S&L crisis in the 1980s. We did see a housing bubble in Texas, based on the energy boom and bust; there were also problems in a few other areas, notably New England. But bad as the Texas home loan problem got, it did not go national. The recession of 1990 was less severe in other parts of the country, and in any event, home prices remained tethered to borrowers’ incomes in the country as a whole. But that was your father’s home loan problem and the rating agencies are paid to know the difference.

Rating agencies have a tighter relationship with issuers of structured bonds than they do with, say, corporate bond issuers and that may be examined in this case too. In corporate bonds, the agencies heavily consider the ratios of cash flow to interest expense and other fixed charges such as capital leases when they make their bond ratings. IBM, for example can’t grow more cash flow out of thin air in order to make S&P happier. If they want to borrow money in the bond market, they give the agencies their financials and the agencies decide how strong the bond is, and that is mostly that.

But structured product issuers can do all sorts of things to make their issues stronger and get higher ratings for the top tranches. They can assign more cash flow to the top tranches, or they can increase the overcollateralization factors, to name two. So the issuers could and did rejigger a structured product until they got the rating they wanted.

Meanwhile, one has to wonder: if the the agency effectively blessed the structure, are they invested in that structure? And would they be reluctant to downgrade the issue even when new information casts doubt on the issuer’s ability to repay the debt? That’s the subtle potential for conflict of interest that an agency faces when rating structured products.

The more blatant potential conflict, and Judge Scheindlin cited this in her ruling, is that structured product ratings pay the agencies about three times as much as other ratings do. So the agencies may have had at least some incentive to curry favor with the issuers of structured products — as in, give them a triple-A on the Cheyne SIV, get more SIV business next week. If that turned out to be the case, the agencies came awfully close to selling top ratings for cash.

I only wish that the ramifications of this case stopped with the rating agency business model, but they also strike at America’s influence and reputation for probity. Think of it this way: corporations — and sovereign governments around the world — care about what their bond ratings are when they want to borrow money.

Despite their flaws, the rating agencies provided a baseline opinion that was respected, and having institutions like those domiciled here, was one of many things that made the United States a country that others wanted to emulate. When the rating agencies fail so grossly, like it or not, it reflects on us.

This is the sort of thing China and Russia talk about when they question America’s legitimacy as custodian of the world’s reserve currency. These are the sorts of things that the leading power needs to get right — or fix quickly — if it wants to stay in the lead. Which is why prompt and credible rating agency reform (and a few criminal prosecutions if evidence warranting that emerges in this case) would be a small but significant gesture that could do us a world of good.

Comments

[chap08:]

Many people under estimate how big a factor the rating agencies were in the financial crisis. They were central to it - one of the primary causes. Bankers felt absolved of the need to fully understand complex products "because it was AAA". The agencies knew what game they were in. Your statement that they "may have had at least some incentive to curry favor with the issuers of structured products" is perhaps the understatement of the decade.

This problem is similar to the accounting problem that surfaced around Enron. In both cases the accountant/agency is subject to a conflict of interest because of the way they are paid. Until we can figure out a better way of rewarding them this will remain a problem. In the case of the accountants, big moves were made to separate out audit and consulting. In the long run, that makes little difference. The only thing that works at the moment is the legal process. Enron resulted in criminal charges and Arthur Andersen being put out of business. Something similar needs to happen with the rating agencies. Without visible action and results, we can not claim our form of capitalism to be any better than Russia's.

Sep 09 06:13 AM

[David Van K...:]

This is an excellent article, thanks. I agree that the role of the rating agencies has been vastly underplayed in reporting on the financial crisis. So has the role of property appraisers. In both instances, the "rater" is paid by the entity seeking a favorable rating. This situation is obviously rife with conflicts of interest. Let's not get too excited about the ruling though. It did not invalidate the free speech defense. It merely said this case could go forward. If the free speech defense is abrogated, that will come later, far down the road, and would come as the result of an appelate decision, not a verdict in a single case. I would not be surprised to see this case settled, with no verdict and no appellate opinion.

Sep 09 08:38 AM

[Graham and ...:]

We believe in protecting "free speech." But we don't advocate protecting rating agencies in this context, because what they claimed as free speech really wasn't "free" (costless). The attached blog explains why.

seekingalpha.com/insta...

Sep 09 08:59 AM

[superGlu:]

I guess only Einhorn can have an opinion these days, right?
Nobody else can use their 1st Amendment Rights?
Thrash.
Einhorn loses this one.
No more Lehman's...

Sep 09 09:40 AM

[MikeOz:]

Very thoughtful article - thank you. Same also for Chap08's comments.

In regard to the last 3 paragraphs of the article, if you live and do business outside the USA as I do, you do hear opinion at times that the US borrowed for its own low income housing on the basis of false information, US Banks securitised the loans, S&P and Co then give the securities AAA ratings, which were then used to market those securities to foreign pension funds (like mine).

Whether or not it's fair, there's a feeling that the US mortgage industry mugged foreign pensions as well as its own.

Many funds and banks in my part of the world had rules which explicitly stated that AAA rated (and also one or two grades below that) investments did not require additional analysis.

Everyone agrees those rules now look pretty stupid, but I believe the damage done to reputation is permanent.
An S&P rating on a bond will forever more be regarded as a superficial and light-weight analysis.
This seems especially true now in Asia and the ME.

Sep 09 09:44 AM

[kingaj12:]

Very good article and comments, especially Chap08 and MikeOz. Thank you.

Reform of ratings agencies is the main piece of business needed to restore financial health and to allow the central bankers to draw down government issued liquidity. An effective reform will probably require changing the notion of a "rating".

Transparency is the key issue. A ratings service that enables investors to run their own internal models against the underlying assets would go a long way to restoring confidence in asset-backed paper. The technology to do this is all based on Monte Carlo simulation of cash flows from an underlying factor model. As I understand it, these models and their assumptions are part of the material reviewed by a CRA to justify the ratings application.

How to make this transparent to investors? Well, the models and assumption are captured in computer programs that are run against a database of assets, the results of which are part of the submission to the CRA. Computer programs have interfaces that enable users to change their input assumptions (for example: HPA, interest rate trends, etc). If these computer programs are required to have standardized interfaces, then investors could substitute their own models for those reviewed by the CRA - without needing access to the details of each and every asset in the portfolio.

Extending this thought a bit further: CRAs in effect rate the qualities of a computer model that is seeded with assumptions and is run against a database of privileged information. There are many models out there in the financial world. Some models perform better than others in certain environments. If the interfaces are standardized, then investors could subscribe to multiple model providers. Ratings services could track and rate "model" performance!

So how could we get started on this? I think the key requirements are 1) standardization of the inputs of the cash flow generation modules, and 2) the right of any investor to substitute their own model for those examined by the CRA.

Sep 09 10:46 AM

[Genesis:]

What does free speech have to do with it??
If I pay a doctor for advice, he can't just sit there and lie to me. The consequences could be fatal, just as the consequences with ratings agencies can be (and have been) fatal for one's financial health.

Sep 09 10:58 AM

[NUCLEAR1929:]

rating agencies cant be trusted no more, they only work in the bull market, in depression ratings dont work

Sep 09 11:49 AM

[pslater:]

An excellent article and very good comments too. I believe that once again Congress is sat the heart of this mess. Congress created the need to use the rating agencies when they designated them Nationally Recognized Statistical Rating Organizations and required large investors to use their ratings. This not only sanctified the raters business model of the issuer rather than the consumer paying for the ratings, it also created a high barrier to entry (read: monopoly) for any potential competitors.

There will be no meaningful reform of these agencies (or anything else in government) until there is meaningful reform of Congress.

Sep 09 11:52 AM

[Alan Young:]

Good article.

The background of the "free speech" issue is that the last time someone tried to sue the ratings agencies, they argued that their ratings were protected by the first amendment as "commercial speech"-- and the court let that argument win. That's a jaw-dropping anomaly: your billion-dollar investment relies on a standard of accountability that's the equivalent of advertising! So it's imperative that the courts revisit this question, and hold the agencies accountable.

The danger is that they will find facts that distinguish the present situation from the previous case, slap the agencies on the proverbial wrist, and leave the precedent of "commercial free speech" intact. That would leave us back where we started. Watch carefully.

Sep 09 12:20 PM

[foxy 44:]

perfect exemple of ratings agency are lie, anyboby around the wolrd believe that:


U.S., U.K. AAA ratings safe. Moody's said the triple-A sovereign debt ratings of the U.K. and the U.S. aren't at risk in the 'near future.' The ratings agency said only a sustained increase in government debt over several years would warrant a downgrade, but that it doesn't anticipate such an event. The comments could help lift the battered British pound.

Sep 09 12:47 PM

[candooman:]

Let us start from the beginning. Ex-President Carter, in his desire to help the poor, pushes the banks to lend to the poor. The banks refuse to go along - unsound banking practice. With the help of a Democratic congress, Community Redevelopment Act was enacted and banks were allowed to start securitizing loans. Fannie Mae and Freddie Mac refuse to buy the loans - again unsound banking practice - but agreed after Democratic appointees were put in management positions. The appointees saw this as an opportunity to get sky high bonuses. The Fed (Greenspan) with his myopic vision (we did not know this then) went along and allowed securitization and derivatives to florish. The laws enacted after the 1907 and 1929-33 financial disasters (Glass-Steagall among others) were slowly whithered away, first by the Democratic congress and later by the Republicans and now the Democrats again - because they were getting millions in campaign money from the financial institutions and wall street --- same institutions that caused the 1907 and 1929-33 crisis.

All this could have been stopped at the doors of the rating agencies, the last barrier. But again, big money (large executive bonuses) came into play. Those insider who had the moral turpitude recognized the scam and refused to go along...and as expected, were fired.

All these events and actions were clearly explained and discussed on several programs for the last six months on 60 Minutes, NOW, Bill Moyers, Newshour with Jim Lehrer and even the 3 networks. I hope ... this is a big hope ... those who were fired would all be put on the witness stand to testify on what went on inside the CRA agencies and bring down this free speach defense. We shall see in the next few months if this Judge and the other one (can't remember his name) who is not accepting the BofA/SEC bonus case settlement can really do justice for the American people.

Sep 09 02:21 PM

[RiskAverseA...:]

On agency AAA rating affirmation of U.S. and U.K. debt (noted by foxy44)... one wonders if the purpose of this act is, by its display of unjustified chauvinism (surely, the ratings agencies have lost a great deal of credibility, and likely irreparably), meant to provoke those interests in China and Russia pushing (with City of London and Wall Street prodding) for an end to the U.S. dollar's reserve currency status?

Sep 09 04:09 PM

[jeffgroove:]

I could not agree more, excellent comment btw, we need more judges like this shira lady and others to stand up for the little people. Too much money and too few principles.


On Sep 09 02:21 PM candooman wrote:

> Let us start from the beginning. Ex-President Carter, in his desire
> to help the poor, pushes the banks to lend to the poor. The banks
> refuse to go along - unsound banking practice. With the help of a
> Democratic congress, Community Redevelopment Act was enacted and
> banks were allowed to start securitizing loans. Fannie Mae and Freddie
> Mac refuse to buy the loans - again unsound banking practice - but
> agreed after Democratic appointees were put in management positions.
> The appointees saw this as an opportunity to get sky high bonuses.
> The Fed (Greenspan) with his myopic vision (we did not know this
> then) went along and allowed securitization and derivatives to florish.
> The laws enacted after the 1907 and 1929-33 financial disasters (Glass-Steagall
> among others) were slowly whithered away, first by the Democratic
> congress and later by the Republicans and now the Democrats again
> - because they were getting millions in campaign money from the financial
> institutions and wall street --- same institutions that caused the
> 1907 and 1929-33 crisis.
>
> All this could have been stopped at the doors of the rating agencies,
> the last barrier. But again, big money (large executive bonuses)
> came into play. Those insider who had the moral turpitude recognized
> the scam and refused to go along...and as expected, were fired.<br/>
>
> All these events and actions were clearly explained and discussed
> on several programs for the last six months on 60 Minutes, NOW,
> Bill Moyers, Newshour with Jim Lehrer and even the 3 networks. I
> hope ... this is a big hope ... those who were fired would all be
> put on the witness stand to testify on what went on inside the CRA
> agencies and bring down this free speach defense. We shall see in
> the next few months if this Judge and the other one (can't remember
> his name) who is not accepting the BofA/SEC bonus case settlement
> can really do justice for the American people.

Sep 09 05:00 PM

[Boxed Merlot:]

MikeOz:
Sep 09 09:44 AM
…Whether or not it's fair, there's a feeling that the US mortgage industry mugged foreign pensions as well as its own…

SA Wall Street Breakfast: Must-Know News‏ 9/9/09:
…Moody's said the triple-A sovereign debt ratings of the U.K. and the U.S. aren't at risk in the 'near future.'…

I for one certainly hope the judiciary will hold the legislative and executive branches feet to the fire over this utter failure to protect the vital interests of the United States. Their irresponsible conduct has caused more international harm than Iraq’s military withdrawal from Kuwait. If our Judiciary allows them, Barney et al, to escape unscathed, we will descend further into the abyss, regardless of Moody’s attempt at resuscitation, IMHO.

Sep 09 06:52 PM

[Moon Kil Woong:]

Great title wih regards to ratings agencies: "Free Speech Not Freedom to Defraud". Ratings agencies are complicit in the improper valuation in the market of mortgage bonds, insurance, stock issuance, and bank risk. The question is determining the level and scope.

Sure the ratings agencies have conflicts of interest and may or may not know much more than they report. And sure the reporters are paid for good results to support issuance and not reports calling into question the new issuances they cover. Sadly, despite all that we know that is rotten in the Denmark we can call ratings agencies (more like fraud agencies) I have yet to see any reform that prevents such abuses they have enjoyed from being perpetuated into the next bubble. Buyers beware...

Sep 09 09:06 PM

[iviewit:]

Another Scheindlin Case Exploding in Fed Court

IVIEWIT TRILLION $$ FED SUIT DEFENDANT PROSKAUER ROSE SUED IN GLOBAL CLASS ACTION RE STANFORD PONZI
www.free-press-release... for full press release

IVIEWIT TRILLION $$ FED SUIT DEFENDANT PROSKAUER ROSE SUED IN GLOBAL CLASS ACTION RE ALLEN STANFORD PONZI

Proskauer Rose Sued in Stanford Ponzi – Blood Oaths with Regulators – Iviewit Suit “LEGALLY” related to NY Supreme Court Whistleblower Christine Anderson Heading to Trial with Judge Shira Scheindlin

Whistleblower Suit Set for Trial

As the public federal trial of systemic corruption allegations inside the NY State Supreme Court Appellate Division First Department (First Dept) approaches, more bad news for the Proskauer Rose law firm erupted. Last week WSJ reported CFO of Stanford Financial Group, James Davis, involved in the $7 Billion Robert Allen Stanford Ponzi. Davis pleaded Guilty to fed charges while appearing to implicate counsel Proskauer & partner Thomas Sjoblom orchestrating a plan to Obstruct SEC & FBI investigations into Stanford & more. blogs.wsj.com/law/2009...

Christine C. Anderson a former Staff Attorney at the First Dept filed WHISTLEBLOWER allegations in a fed suit slated for trial Oct 13 in US District Court Southern District NY (USDC), Anderson v State of NY, 07cv09599. iviewit.tv/press/press...

Anderson’s suit adjudicated by Judge Shira Scheindlin contains allegations of retaliation against Anderson for termination from her job of 6 yrs, after Anderson exposed systemic Whitewashing & Obstruction inside the First Dept, claiming favoritism by the First Dept for favored law firms & attorneys. exposecorruptcourts.bl... & iviewit.tv/press/press...

Anderson’s suit set to bring volcanic like testimony involving public office corruption & testimony by officials of the NY State Unified Court system, including Court of Appeals Chief Judge Jonathan Lippman, Presiding Judge at the First Dept during the firing of Anderson. Along with Lippman will be Defendants in Anderson, First Dept Supervisor Sherry Cohen, Former Chief Counsel Thomas J. Cahill, Hon John Buckley, David Spokony & Catherine O’Hagen Wolfe, Clerk @ US Second Circuit Court of Appeals (USCA), an initial Anderson defendant in her former job as Clerk for the First Dept, now witness in Anderson. Anderson claims Physical Abuse & Harassment by Cohen for her heroic WHISTLEBLOWING, Anderson gave riveting testimony to the NY Senate Judiciary Committee headed by former Proskauer asst Sen. John L. Sampson. Anderson testimony @ 30min www.youtube.com/watch?...

Prior to permitting Anderson to trial, Scheindlin marked 7 suits, including Iviewit’s Trillion Dollar suit iviewit.tv/press/press... legally “related” to Anderson.

Proskauer Ties to Stanford, Madoff & Dreier

The Stanford Ponzi investigation may be the card that knocks down the house of cards at Proskauer. Uncovering of the $65 Billion Madoff Ponzi led the SEC & FBI to intensify investigations into Stanford,

‘Perhaps the most alarming is that Stanford Investment Bank has exposure to losses from the Madoff fraud scheme despite the bank’s public assurance to the contrary’, said the SEC. www.timesonline.co.uk/...

Ironically, Sjoblom worked for the SEC & now is implicated in FBI & SEC actions, advising client Stanford on “how” to lie to the SEC. Huffington Post on Feb 20, 09 claims,

Sjoblom, a partner at law firm Proskauer Rose doing work for Stanford’s company’s Antigua affiliate, told authorities that he ‘disaffirmed’ everything he had told them to date…Sjoblom spent nearly 20 years at the SEC, & served as an Asst Chief Litigation Counsel in the SEC’s Division of Enforcement from 1987-1999.

www.huffingtonpost.com...

Bloomberg on Jan 14, 09 states,

The week after Bernard Madoff was charged with running a $50 billion Ponzi scheme, Proskauer Rose…offered a telephone briefing on the scandal for its wealthy clients. With only a day’s notice, 1,300 Madoff investors dialed in. ‘This is a financial 9/11 for our clients’, said Proskauer litigation partner Gregg Mashberg…‘People are dying for information.’ www.bloomberg.com/apps...

Following the “client” call, investigations began into major “clients” involved in Madoff, Proskauer having perhaps the most Madoff “clients”, many who originally claimed to be victims may now be accomplice. SEC OIG delivered a stinging report on Madoff harshly criticizing lax regulators for overlooking the Madoff information from WHISTLEBLOWERS & others inside the SEC, for years. www.foxbusiness.com/st.../

Proskauer has further ties to Madoff according to TPM, in 2004 an SEC attorney, Genevievette Walker-Lightfoot, notified the SEC of the Ponzi but was forced out of her job, the SEC later settling a claim filed by Lightfoot. Upon termination, Lightfoot turned over the Madoff file to Jacqueline Wood who then presumably buried the report that could have exposed the Ponzi in 04. SEC OIG’s report mentions Wood of Proskauer throughout the entire report as a key figure in the regulatory failure. www.sec.gov/news/studi...

After leaving the SEC, Wood took a Proskauer partnership. tpmcafe.talkingpointsm...

Laura Pendergest-Holt, Stanford’s CIO, criminally charged in the Stanford investigation, then filed a civil suit against Proskauer & Sjoblom claiming they “hung her out to dry” before the SEC. Meanwhile, Sjoblom solicited a multi-million dollar retainer from Stanford’s Chairman, A. Stanford, the night before the events with Holt at the SEC. www.memphisdailynews.c...

WSJ reports filing of a Class Action suit against Sjoblom & Proskauer in TX after Davis’ incriminating plea agreement implicated Proskauer, seeking damages for the entire $7 Billion in damages for Proskauer’s role Aiding & Abetting,

The civil suit is largely based on a plea agreement that we mentioned in this post yesterday, which focuses in part of the alleged actions of Sjoblom, who became outside counsel for Stanford’s international bank based in Antigua in the Caribbean starting in 05. blogs.wsj.com/law/2009.../

Another defendant in the Iviewit Lawsuit, convicted felon Marc S. Dreier, found orchestrating yet another bizarre Ponzi, in the Dreier scheme, we find former Proskauer partner Sheila M. Gowan as bankruptcy trustee in the suit. blogs.wsj.com/law/2009...

NY Attorney General Defendant in Iviewit Suit

While acting as the NY Gov, Eliot Spitzer, former NY AG, reached out to his former Deputy AG Dietrich Snell who left the AG to take a Proskauer partnership, in order for Snell to act as defense counsel for Spitzer during the TrooperGate / HookerGate scandals, resulting in Spitzer’s resignation. www.nydailynews.com/ne...

Snell working for Spitzer at the NY AG when Iviewit filed complaints with the First Dept & NY AG against attorneys involved in the patent thefts. Spitzer a named Defendant in the suit, other Defendants include First Dept, law firms ( Proskauer Rose, Meltzer, Lippe, Goldstein & Schlissel, Foley & Lardner ) & corp defendants include, Intel Corporation, Lockheed Martin Corporation, Silicon Graphics, Inc., IBM, MPEG-LA, LLC, Crossbow Ventures, Wayne Huizenga, & many more.

Cease & Desist

Iviewit secured seed funding from billionaire Wayne Huizenga & Crossbow Ventures whose investments were two-thirds SBA funds. Iviewit signed & executed NDAs, licensing agreements & strategic alliances starting in 1998 with many Fortune 1000 companies. Companies with signed agreements include; Real 3D, Inc., ( a consortium of Intel, Lockheed & SGI ) Dell, Wachovia, Warner Bros., AOLTW, Raymond James, Lehman Brothers, Bear Stearns, CIBC World Markets / Oppenheimer, Kodak, Motorola, General Instrument Corporation, Paine Webber, Pequot, Sony, MGM, NCR & more.

Recent formal Cease & Desist & Demand Letters have gone out to major players Intel, Lockheed & SGI, who formed Real 3D, where leading experts & engineers from the companies tested & used the technologies. Iviewit filed a formal complaint to SEC Chairperson, Mary Shapiro against Intel & others. The complaints filed for possible violations of FASB No. 5 resulting from possible failure to report liabilities to Shareholders. Liabilities resulting from the Trillion Dollar suit they are named defendants in & failure to report liabilities resulting from knowing & willful infringement in violation of signed agreements for almost 10 yrs. Accounting for the liabilities should appear in the Annual Report to Stockholders as required under FASB. iviewit.tv/press/press...

In recent patent disputes, settlement in excess of $600M was reached involving RIM Blackberry & NTP on the strength of an NDA. money.cnn.com/2006/03/.../

Microsoft was issued an Injunction that awarded hundreds of millions in damages to i4i, for willful infringement of technologies embedded in MS Word. The injunction also forces a product recall of ALL products with MS Word since 2003. news.idg.no/cw/art.cfm...

Injunction in the Iviewit suit forcing a Cease & Desist & product recall would shut down internet video, reduce digital TV channels by over 75%, recall hardware & software that uses the technologies since 1998, a recall unparalleled in history. The Iviewit matters involve investigations ongoing with the DOJ, DOJ OIG Glenn Fine, Harry Moatz, Director OED US Patent Office, the FBI OPR, the SBA OIG, former US AG Michael Mukasey, current US AG Eric H. Holder, Jr & more. Feb 09 petition to President Barack Obama & Holder @ iviewit.tv/press/press...

News

iviewit.tv/press/index...
Eliot I. Bernstein
Inventor
Iviewit Holdings, Inc. – DL
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Sep 10 08:32 AM

[Pat C:]

Candooman, I don't buy your CRA argument. This was organized. Poor people or their representatives are not. The CRA's influence on this was minimal.

Sep 10 03:44 PM

[Stone Fox C...:]

Rating agencies have always been worthless. Its not like the housing bubble was the beginning. They've typically always take a rearview picture when making ratings. For them to be useful, they must have a 'predictive' value which they don't. They still are telling people what they want to hear. They should be upgrading ratings as the economy improves but their still mostly just downgrading stuff. To me Eihorn is right that MCO is a short. I'm just worried that a great market will over rule and push them up as well.

Sep 11 01:53 PM

[wnwek:]

I have always maintained that rating agencies must be paid in terms of the product they rate, with a discount rate proportional to the grade they assign to a product. That's the only way you can align rating agencies' incentives and good information.

Sep 12 03:50 PM