Buffett Has "No Comment" On His Sale Of $30MM In MCO Shares Just After Moody's Wells Notice Receipt

Tyler Durden's picture

As Zero Hedge first pointed out on Saturday, Moody's is in very big trouble - in its 10Q, in the very last paragraph of the very last page, the company indicated that on March 18, it had received a Wells Notice and a recommendation by the SEC to pursue a Cease and Desist order against the agency's NRSRO status, in effect killing its business model. This was not lost on the market, which punished Moody's stock by 10% yesterday even as every other stock went vertical. When all is said and done the 10% could well become 100%, and as far as the market is concerned nobody would shed a tear: the conflicted rating agency model is long dead, and the independent third party vendors are the only ones that add any actual value at this point. However, far more interesting are the actions by Moody's CEO Raymond McDaniel and key shareholder and kindly grandfather, Warren Buffett, both of whom sold millions worth of Moody's share and stock, the day of, and just after, the Wells notice receipt. The New York Times has reported that Buffett, who recently has not had a problem commenting on pretty much everything, and was vociferously defending not only arch monopolist Goldman Sachs at his annual ukulele outing in Borsheims, but Moody's as well, has had "no comment" on his sales. Perhaps it is time for someone to take Mr. Buffett to task, instead of just to his word: sure, it could be just a coincidence... or three - he sold over $30 million in MCO stock on March 19, March 24 and March 26. Or it might not. However, now that it has become far too clear that nobody in the finance business has a shred of integrity and honesty left, perhaps it is time an independent and impartial jury to decide if any impropriety based on material, non-public insider information, was committed.

From the New York Times:

According to regulatory filings, Raymond W. McDaniel Jr., Moody’s chief executive, sold or exercised options worth about $4.3 million on March 18, the same day that his company received the Wells notice.

Moody’s shares closed at $29.66 the day of Mr. McDaniel’s sale, near their high of $30.54 so far this year. Moody’s shares have traded as low as $18.50 over the last 52 weeks. On Monday, the shares fell as much as 12 percent, but finished the day down 7 percent at $21.77.

Moody’s said Mr. McDaniel’s sales in March were part of a prearranged plan established about a month before the Wells notice arrived.

Berkshire Hathaway, the investment vehicle for Warren E. Buffett and a major Moody’s shareholder, also sold more than one million shares worth more than $30 million on March 19, March 24 and March 26. The sales represent a small portion of Berkshire’s overall stake in Moody’s. Berkshire did not return a call seeking comment about its sales. A spokesman for the S.E.C. would not comment on Moody’s disclosure.

And an even bigger problem for Moody's is that the Wells Notice, with its open ended outcome, comes at a horrible time for the firm - in a book straight out of Goldman Sach's future, Moody's is now struggling to even keep up with all the lawsuits that are hitting it not daily but hourly. It will be difficult for the SEC action not to precloud the judgment of any of a variety of juries that will be asked to opine on just how potentially criminal Moody's actions may have been in allowing toxic sludge to be rated AAA+++ for a good 5 years, and, according to some, to allow the credit bubble to reach its historic proportions.

According to Moody’s, the S.E.C. was prompted by a report in May 2008 in The Financial Times. The article stated that in 2007, members of a committee that oversaw a certain type of European derivative — called constant proportion debt obligations — knew that some of the products had been given inflated ratings because of a problem in the company’s risk modeling software.

Without that problem, The Financial Times reported, the bonds would have received ratings as many as four notches lower. Moody’s corrected the software error, but the bonds maintained their Triple A ratings until January 2008.

Moody’s hired an outside law firm to investigate the matter, and subsequently took disciplinary actions that included terminations, according to Mr. Adler. He declined to provide further detail.

In June 2007, the company submitted an application to become a nationally recognized statistical rating organization, as required by S.E.C. regulations. That application included a code of conduct. The Wells notice essentially says that because Moody’s employees had violated that code, the application included a false and misleading statement.

What the S.E.C.’s action will mean for lawsuits against the ratings agencies is unclear, though Adam Savett of RiskMetrics, which has tracked the litigation, predicts that it might serve as a thumb on the scale for plaintiffs’ lawyers.

“Judges are human and when they look at the facts of a case, if this Wells notice turns into an actual lawsuit, it will become part of the gestalt when judges weigh whether to allow cases to go forward,” he said. “Then again, if you take a step back, the judges in these cases have been focusing very narrowly on the facts before them, taking each case on its merits, teasing out the true culpability. There was a concern in the business community initially that there would be mass lynchings for the ratings agencies in courts across the country. But that has not happened.”

If we were betting men, we would say those MCO $2.50 strike 2011 Puts look damn attractive right about now. Since we are not, we will leave the trade to some other, soon to be much richer, gambler, better known as investor.

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Fecklesslackey's picture

And Martha Stewart had to go to jail for $58,000 in opportunistically timed profits 

tpberg7's picture

To the average American, the news of this kindly old grandpa from Omaha being nothing more than a cynical, hypocritical gangster brings feelings of shock and awe!  The end is very near.  I am grateful that my father died two years ago.  He idolized the so-called "Oracle of Omaha".  The image was carefully crafted by the media and the BRK PR team but now brings forth thoughts of the "Hollow Men" by TS Eliot:

We are the hollow men

We are the stuffed men

Leaning together

Headpiece filled with straw. Alas!

Our dried voices, when

We whisper together

Are quiet and meaningless

As wind in dry grass

Or rats’ feet over broken glass


monmick's picture

Martha went to jail for perjury, as I recall..

Tart's picture

They'll put Martha Stewart in jail but I'd bet my life savings this old fraud never sees a day of even questioning.

GillianX's picture

Buffet lost it long ago when he started believing his own bs. His ego is ginormous! 

BlackBeard's picture

Buffet is like everyone's favorite uncle that just got caught molesting his niece.

Now, we all hope that he'll take a tumble down a flight of stairs in his wheelchair, preferably a baseball stadium flight of stairs.

declineNfall's picture

how about a vote on the grand old man and his ethics on zero hedge?

if you havnt read Talebs explanation of Buffets genius then pick up Fooled by Randomness and learn a bit about survivorship.

Mercury's picture

It's more than that.  It's his cost of capital and the fact that he gets paid up front in the form of insurance premiums.  Every stock BRK has ever bought/sold is in the record.  If you recreate a portfolio with those buys and sells you don't end up with as much $$$ as BRK did.

bad craziness's picture

These rating agencies serve no purpose shortly when they are forced to downgrade the US.  Kill the giant bats before they swoop on my casino town.

AD70's picture

This is truly disgusting.  I had a lot of respect for Warren before his GS comments.  Now this just comfirms that the Oracle is more like the Wizard of Oz, just an old shriveled man hiding behind a mask, pulling the strings of material non-public information to make himself appear someone he is not.

Tic tock's picture

We're never going to get the data we need to clear this mess up if jail and justice is caslled for, no? Lets just elect one bank as a reciever for Wall st., give all the bankers part of Texas, or a Dakota, or somewhere, parcel out land in the form of rewards for providing information- and call it a day on terrible government and financial rape.

dumpster's picture

part of texas.. lol the powers behind the curtain want most of the world ,, leaving a part of bangldesh and deathvalley for the rest.. any open space in cities they will pave over  and charge ten bucks an hour to park 

Hansel's picture

We could make room for the banksters in Huntsville, TX

Iam_Silverman's picture


Death Row there is the fast lane.  Run em' through like cattle at times.  It's only about a three hour drive - I'd go watch, if I could afford the gas.

dumpster's picture

why now .. buffet has covered his tracks for years ,, even since the silver affair. Armstrong had the goods on him ,now is rotting in jail on trumped up charges .

so buffet has no qualms about seeing a person rot in jail for his own financial power truly a fine specimen of a human being that buffet..

as  he sets at the bridge table .. by the way have any of you seen his yacht of considerable size  

just look ruffled, say aw shucks ,, pretend to be a thrifty guy living in a little house in Omaha ,, eating dairy queens ,, and munching down sees chocolate setting in a lazy boy rocker from R.C. Willy

williambanzai7's picture

In surprise twist, Goldman Sachs has stated that it has full confidence in the

ethical and compliance practices of Warren Buffet.

Ned Zeppelin's picture

The Avuncular Billionaire Thief.

Miss Expectations's picture

So, now we know what Warren looks like naked.  Not a pretty sight.

chindit13's picture

So does Becky Quick get conjugal visits?

The Rock's picture

LOL, you know she would be all over it!

Fazzie's picture

 lol. Would the viagra be tax deductable?

HEHEHE's picture

This is Warren Buffet we are talking about, the patron saint of capitalism, he sh*ts gold bars and heals bear markets with the touch of his hands.  Certainly Warren Buffet would NEVER trade on insider information.  "sarcasm off".  I am sure they have nice Federal Pens in Omaha.

RockyRacoon's picture

It wasn't Warren.  He was totally ignorant of the activity.

It was that new guy they hired, Fabrice something or other.

Mercury's picture

I guess this all hinges on whether the Wells receipt was 'public' information (on March 18) or not.  Does the SEC post this kind of thing somewhere on date of issue?  Is Wells info only public when the target company announces it?

I'm sure Buffet originally liked MCO because of it's oligopolist position in the marketplace. 

More ways to win > more ways to lose = BUY.

Now it's becoming obvious to all that a debt rating oligopoly is part of the problem...and that the government might actually think about doing something about it.

More ways to lose > more ways to win = SELL.

Handle with care's picture

What a classic Greek Tragedy.  The ancient kind not the modern.


A lifetime building a reputation and its all about to be lost due to overwhelming greed.


If he'd waited until the news was public and sold his shares he's be about $3 million worse off than he is today, but his lifetime's work would be intact.


Instead, for the sake of an amount of money that is 0.01% of his net worth, everything he is and everything he has ever done has now been devalued and cast into doubt as to whether it was merely the proceeds of a successful thief

rawsienna's picture

Dirty  - if true, worse than Goldman .

TaylorVonGrela's picture

I usually agree with Tyler and ZH, but in this case, I'm on Buffet's side.  If you would take the time to look back at SEC filings, you'd see that he has been strategically selling MCO shares for a very long time.  Saying that he may have been trading on insider information because he sold more shares after the wells notice was served is purely speculation.  My take is that he recognized the litigation risk in MCO long ago, and has been selling strategically when the shares were $25 or greater. 

Iam_Silverman's picture

What you are implying has merit - but, the letter of the law says that when you are in possession of information of that nature, you should suspend your trading activity.

If I had been selling Toyotas at a local dealership, and then I had an advance warning that they were defective in some manner (say, oh, steering or acceleration issues), would I be wrong in NOT telling my customers just because I have been selling this brand for X number of years?

You decide.....

tomb traider's picture

Would he take such a risk for some pocket change? He could have sold now for

around $ 20 a share so his total gain would be a lousy 10M.

cbaba's picture

He is an asshole dressed and showed to American public like a saint.

Its no wonder that he supports Godman Sucks fully,he is corrupt as GS.


velobabe's picture

oh, when i read and saw this story i lost all respect for this pimp.

The Billionaire's Black Sheep

Nicole Buffett is at home among the neo-hippies who shuffle along the laid-back, tree-lined streets of Berkeley, CA. At an elfin 5 feet tall, clad in a flowing peasant dress and sandals adorned with peace signs, her long hair cascading in ropy dreadlocks to her waist, the 32-year-old abstract painter is just another of the city's free-thinking, granola-crunching denizens. And yet, she's a walking oddity. "The first thing most people think of when they hear my last name is money," she laughs.


becky quick is a curious one. voice is male.

bet, rick santelli suffers from bulging balls.


don't get msnbc everywhere i go, but mika's story is pretty compelling. she's got a little nasty to her. broadcast time is too east coast,
Mika Brzezinski - Wikipedia, the free encyclopedia

for my lifestye, though.


Goods's picture

Hummm could this be the reason why Moodys is being silenced? 

U.S. Debt Shock May Hit In 2018, Maybe As Soon As 2013: Moody's



The Rock's picture

The Rock says,

"It's time to take that ukulele...

shine it up real nice...

turn that sumbitch sideways...

and stick it straight up his candy ass!"

Mark McGoldrick's picture

Very fishy..

First of all, Moody's might have received the Wells Notice on March 18th, but the executives would have been fully aware that the SEC was on its coattails long before that.  Mr. McDaniel most likely knew that immediate trouble was brewing, and decided to "pre-arrange" a sale that coincidentally happened on the Wells Notice day. The "pre-arranged" defense is meaningless if the breakdown between the SEC and Moody's happened before the Wells filing, which is always the case (I think). I don't think that a Wells Notice is filed out of nowhere, with no prior contact with the company.  

It's the largest insider sale in McDaniel's history, and accounts for over a third of his holdings.  

There are two very important questions.  First, when did the SEC begin their investigation and correspondence with Moody's?  Second, when did the breakdown between Moody's and the SEC occur that eventually led to the March 18th Wells filing?   

Buffet began to scale out of his position in July 2009--not that long ago.   

bugs_'s picture

Deep Shah got nuthin on Warren.

Turd Ferguson's picture

Trader: "Mr. Buffett, we just got some bad news on MCO".


Warren: "Hold on. I'm a little busy here."


Trader: "But, sir, MCO is going to zero".


Warren: "Oh, shit. Becky. Becky. Stop for just a moment." (extracts genitalia from oral fissure)


Becky: ""Anything you say, sir". (rinses and washes finger tips)


Warren: "Sell! Sell all the damned MCO now!!"


Trader: "You got it, sir!"


Warren: "OK, Becky. Back to work!"


Becky: (inaudible..slobbber..slobber)

Cursive's picture


Thanks for this.  It is refreshing to read someone who understands the truth about Warren Buffett.

Problem Is's picture

Let me write that headline:

Nebraska Corn-hole Financier Mogul Silent on Massive Rubin-esque Insider Trading Scheme in Moody's Stock

I am telling you... I have a knack for these things...

Tyler: Marla IS in charge of the CAPTCHA servers now, right?

She has to be. The answers work without error for the first time in weeks and.... now I am getting 69 and -69 for answers...

JW n FL's picture

Moody’s rated the bond’s (which lead to the cdo’s being rated and cdo’s +++ we will call the rest for ease of consumption)… when the Federal backstop had been in place for 30 years plus.

Moody’s thought as anyone with a brain would that as the market grew the 50 to 1 leverage would be bought down by the other or new Federal dollars coming in, thru the front door not the back.

The un-written rule or un-written law that these loans where backed by the Federal Government was in full force when Moody’s rated these Bond offerings.

Moody’s believed the Federal Government, now the Federal Government is going after Moody’s for Moody’s believing the Federal Government’s Bullshit?


5,500,000 million new Families… this decade… as called for by the Leader of the free world.

Until… dumbass Bush then cut funding to the same programs he ballooned in multiples, the same programs that business models where developed for, the same models the Moody’s used for providing ratings… while believing that the Federal Tax Trough would never go empty?! How could the Tax Trough go dry? The President promised, but the President said… well the President did pump the dollars like he promised and then the President changed his fucking mind.


***** “While the Bush administration's budget request for fiscal 2006, which begins Oct. 1, 2005, includes an increase in the number of vouchers for low-income families, it would restore only half the voucher funding that was cut this year, according to a study published on CBPP's Web site. The center estimates that by 2010, funding for all public housing programs, including vouchers, will be 3.7 billion dollars below current levels, which would mean 370,000 fewer families would receive vouchers.” *****



Austerity measures Bitches!!!! You want to know what it looks like… you want to know the aftermath of pulling Corporate America away from the Tax Trough that was ordered in place by the President? The President pulled out 2 years too early… the President said 2007, but in 2005 he pulled the plug. Austerity Bitches!!!


On December 16, 2003, President George W. Bush signed the American Dream Downpayment Act, a new program that provided grants to help home buyers with downpayment and closing costs. The act authorized $200 million dollars per year for the program for fiscal years 2004-2007.



wait you don’t like wiki.. “O” fucking kay! .Gov work for ya? Thanks Conservatives! Thanks Evangelicals!!


December 16, 2003. The American Dream Downpayment Assistance Act authorizes up to $200 million annually for fiscal years 2004 - 2007.


HOME is the largest Federal block grant to State and local governments designed exclusively to create affordable housing for low-income households. Each year it allocates approximately $2 billion among the States and hundreds of localities nationwide. The program was designed to reinforce several important values and principles of community development:



Which was part of: HOME is authorized under Title II of the Cranston-Gonzalez National Affordable Housing Act, as amended. Program regulations are at 24 CFR Part 92.


How about this one?




August 24, 2005 ß-- (Notice the Date)

Global Dollar Demand And The U.S. Housing Market

This comes from today's Wall Street Journal (page A1 in the print version, subscription required for the online version):

Strong demand for mortgage-backed securities from investors world-wide is allowing American lenders to make more loans -- and riskier ones -- in a way that is helping prolong the boom in U.S. house prices.

The cash pouring in -- not only from U.S. investors but increasingly from Europe and Asia -- keeps stoking the housing market even as the Federal Reserve Board continues to raise interest rates, normally something that damps home prices. The market has shown a few signs of slowing recently, and talk of a bubble has grown louder, but prices continue to rise or remain at lofty levels as investors continue to gobble up mortgage-backed securities and banks keep lending.

This is but a variation on a theme I have emphasized in the past:  The "interest rate conundrum", the resulting stimulus to consumer demand, and the stubborn refusal of the U.S. current account to reverse course are all a piece of developments that are fundamentally driven by the desire of foreigners to send their financial capital to the United States.


Moody’s ratings? what Moody’s thought were a decade’s worth of backstopped Federal Monies?

Which got cut short? By 2 years? 2005 ain’t 2007 (see above)!

The Fed knew they were pulling the rug out from the industries feet, the industry they pumped and dumped on the market, the Fed… not Moody’s. No warning, just fuck off and good luck… sorry we are closing that door.



cocoablini's picture

Moodys was a milkrun until they got caught. It was easy gravytrain money making up reports. Now Moodys has to do some actual work and that will cost money. Buffet,now proving that he's no genius, is pulling out his morale hazard credit card and cheating(insider trading) like the rest of them. MORAL HAZARD JERK. Goldman and Moody's-you are sleeping with the wrong hookers.

contrabandista13's picture

Yeah...! Okay.....! Let's throw the old geezer in jail, or better yet let's march him to the gallows......  However, now the question is....  Who're we going to worship when he's gone.... Who's going to be the face of Americanism.....  Larry (Botox) Ellison...., Steve (I bought my liver from a contrabandista on the black market) Jobs...., Who....?


Pray, do tell.....





chunkylover42's picture

Dec. 8 (Bloomberg) -- Moody’s Investors Service said the top debt ratings on the U.S. and the U.K. may “test the Aaa boundaries” because public finances are worsening in the wake of the global financial crisis.

March 15 (Bloomberg) -- The U.S. and the U.K. have moved “substantially” closer to losing their AAA credit ratings as the cost of servicing their debt rose, according to Moody’s Investors Service.

Sunday, February 7, 2010 -- Treasury Secretary Timothy F. Geithner says that the U.S. government "will never" lose its sterling credit rating despite big budget deficits and a newly increased debt limit that now tops $14 trillion.

WASHINGTON, March 16 (Reuters) - U.S. Treasury Secretary Timothy Geithner insisted on Tuesday there is "no way" major credit rating agencies will cut the gilt-edged rating they assign to U.S. debt offerings.


Now, how we can stop those folks at Moody's from saying all this nonsense?


sheeple's picture

Moody's should do what the market did last Thursday, plunge everything (i.e. downgrade everything to below IG), hold everyone hostile

JW n FL's picture
by Goods
on Tue, 05/11/2010 - 08:15


Hummm could this be the reason why Moodys is being silenced? 

U.S. Debt Shock May Hit In 2018, Maybe As Soon As 2013: Moody's




             Moody's already did?! that is the problem... or one of, see above.

Be well, JW



strannick's picture

"May 1 (Reuters) - * Warren Buffett, asked if Berkshire Hathaway Inc will cut its stake in Moody's Corp says rating agencies have a "pretty darn good business" * Warren buffett says rating agencies made same mistakes that he, politicians, mortgage brokers, others made in assessing housing market * Warren buffett says rating agencies have no capital needs, significant pricing power * Warren buffett says rating agency business is good, unless they are forced to change business structure in "dramatic" way "

Is 'darn' a swear word?

twotraps's picture

And this is supposed to make the picture more clear??  Garden variety thievery, just like everyone else.....its Thievery so well done that each and every player was TOTALLY within their legals rights at every stage of the process.  Its brilliant when its legal, and you manage to skim off Zillions at the expense of the larger pool of cash.  Gotta love it, its the way its done.    


So, the whole mkt propped up with side deals, accounting holidays and Massive Govt Funding...so what happens next?  Insult to injury, we saw the real liquidity situation if prices start heading lower, what if that spike was a glimpse of whats to come?