US prosecutors quiz former analysts in S&P investigation, says WSJ

The Wall Street Journal reports that at least five former Standard and Poor’s analysts have recently been contacted by US Justice Department officials as federal prosecutors intensify their investigation into allegations that S&P took a soft stance in rating some mortgage-backed securities.

The analysts are being quizzed on whether managers working for the rating agency elected to weaken modeling assumptions when rating structured securities. This was apparently done to appease clients in search of favourable ratings for their products.

In September the SEC announced it was considering charging S&P over its role in rating Delphinus CDO, a 2007 deal. It alleged that the deal was ramped up with lower quality assets than the rating model originally assumed with S&P failing to react by downgrading the transaction.

The article notes that former employees were told that they are likely to be contacted again while investigators are scouring through internal emails for evidence in the case. It is unclear if current S&P employees have been contacted.