A New York judge has thrown out a whistleblower suit alleging Moody’s issued bogus credit ratings during the financial crisis, costing the U.S. government billions of dollars.

Ilya Kolchinsky, a former Moody’s managing director who brought a False Claims Act suit against the rating agency in 2012, had failed to show that any rating of mortgage securities, credit default swaps, or collateralized debt obligations had caused a false claim to be submitted to the government, U.S. District Judge William Pauley ruled.

“The ‘sine qua non’ of a False Claims Act case is that a false claim must be forwarded to the government, not a private entity,” he said.

Pauley, however, gave Kolchinsky a last chance to make a viable case, saying he could reallege a claim that Moody’s violated the FCA because government agencies are charged for subscriptions to its credit-rating service.

Kolchinsky served as managing director of the derivatives group at Moody’s, where he oversaw ratings of CDOs tied to domestic asset-backed securities. He accused Moody’s of inflating and waiting too long to downgrade its ratings of thousands of CDO tranches so issuers would continue to bring their business to the firm.

Moody’s fraudulent credit-rating practices resulted in, among other things, financial institutions underpaying Federal Deposit Insurance Corp. insurance premiums, the suit said.

FDIC premiums are based, in part, on the quality of the insured’s assets, but Judge Pauley ruled that Kolchinsky had not alleged Moody’s “actually causes third parties to rely on its ratings rather than the ratings of other entities when submitting asset-quality measurements to the government.”

“Even if it were true that reliance on Moody’s ratings caused entities to underpay on their FDIC premiums, the choice to rely on Moody’s was made independently by those entities,” he added.

Pauley also rejected Kolchinsky’s theory that Moody’s allegedly bogus ratings amounted to a misuse of its status as an NRSRO (nationally recognized statistical rating organization). “Government licensure does not transform credit ratings issued to private entities into false claims to the government for payment,” he said.

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