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S&P's Former Commercial Mortgage Chief Sues SEC


nasdaq.com | January 19, 2015

By Timothy W. Martin

A former Standard & Poor's Ratings Services executive filed a lawsuit Friday asking that any Securities and Exchange action against her be heard by a federal court instead of a judge appointed by the SEC.

The filing in a Manhattan U.S. District Court is the latest in a series of challenges around the SEC's use of its administrative law judges to try complicated cases. Some lawyers and defendants say they have more extensive rights in federal court.

The issue has rarely been tested and at least one recent challenge failed.

Barbara Duka, former head of commercial mortgage ratings for S&P, said in her filing Friday that she expects a SEC lawsuit as early as next week highlighting her role in S&P's handling of commercial real estate ratings issued in 2011. Ms. Duka had a supervisory role then overseeing new ratings of commercial real estate deals, as well as the continuing surveillance of previously graded ones.

In November, the SEC's enforcement staff notified Ms. Duka it intended to recommend an enforcement action against her, alleging securities fraud, according to the filing. Ms. Duka denies any wrongdoing.

The SEC is also expected next week to announce a settlement with S&P parent McGraw Hill Financial Inc. around the same 2011 ratings, according to the filing. The SEC notified McGraw Hill in July that the ratings firm could face an enforcement action for alleged securities fraud. The SEC, S&P and McGraw Hill declined to comment.

Senior SEC officials have previously said they consider the agency's administrative judge system to be a fair one.

The SEC's enforcement division has told Ms. Duka's lawyers that it would recommend taking an action against Ms. Duka before one of the agency's administrative law judges, and such a move could occur "imminently," according to the Friday filing. The SEC is scheduled to vote on the recommendation "on or about Jan. 20," according to the filing.

"Barbara did not act wrongfully and always performed her duties at S&P in the utmost good faith. Anyone who would claim otherwise should be required to prove their claim in court and in public, as our Constitution requires," said Guy Petrillo, Ms. Duka's attorney.


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