Moody’s settles captive fraud case

Moody’s has reached a settlement with New York-based law firm Kirby McInerney after it was accused of underpaying New York State and New York City business taxes between 2002 and 2014. Moody’s is alleged to have mischaracterised its income as premiums to its captive, Moody’s Assurance Company (MAC).

Kirby McInerney secured an $8.5 million recovery in the case, after a whistleblower who was formerly employed by Moody’s sounded the alarm in 2018.

The settlement is unusual in that a New York tax whistleblower settled a case that the government itself declined to pursue. Kirby McInerney, on behalf of the whistleblower, pursued the claims itself, with New York State and New York City now sharing in the recovery of millions of dollars.

Kirby McInerney said the result “shows the importance of empowering whistleblowers to carry cases forward even when the government chooses not to take on a case.” The settlement was by far the largest non-healthcare recovery in 2019 under the New York False Claims Act, it added.

Kirby McInerney partners David Kovel and Karen Lerner represented the whistleblower. Kovel said that by giving incentives to whistleblowers to help fight fraud, “we are making sure there is money to pay for important government services and that people who follow the rules are not left to pay the burdens for those who do not.”

Moody’s formed MAC as the captive insurer of Moody’s Investors Service in 2002 to provide coverage for acts of terrorism, excess commercial liability coverage, and reputational damage, among other things. It was not immediately available for comment.

Marsh was accused of aiding and abetting Moody’s in the scheme.