The source of Moody's latest public humiliation in the matter of the Hilton Hotel LBO information leakage to Galleon, has been identified as Deep Shah, an analyst in his mid-twenties, who has since left the company, and is rumored to be back in India. A casual glance at Moody's reports that list Shah as an author discloses numerous other potential deals in which the former Moody's employer may have leaked information.
The WSJ discloses:
Federal prosecutors now allege that a former junior analyst, identified by a person familiar with the matter as Deep Shah, breached that trust in July 2007 when he passed on inside information about Blackstone Group's pending $26 billion takeover of Hilton Hotels.
While Mr. Shah's role in the alleged insider-trading affair is small, his link to the third party -- now a key cooperating witness in the probe -- could shed light on how investigators uncovered the trading ring. Unusual trading in Hilton's shares was one of the first events that attracted scrutiny from regulators in 2007. The same cooperating witness was friends with an executive at Polycom Inc. and also passed on information about Google Inc.
Mr. Shah couldn't be reached for comment. A Moody's spokesman declined to comment on the alleged role of Mr. Shah. He reiterated the company's statement last week, saying that the alleged wrongdoing by one of its employees "would be an egregious violation" of the rating firm's policies.
Mr. Shah, who is in his mid-20s, left Moody's more than a year ago and is believed to have returned to his home country of India, according to former colleagues. One ex-colleague described him as "mellow."
Zero Hedge has conducted an inquiry into Moody's reports that carry Shah's name on them: the associate analyst was busy, as he covered a plethora of LBO-ridden sectors and names in the 2004-2008 time frame, which have included these takeover targets:
- Sabre Holdings
- First Data Corporation
- Computer Associates
- Electronic Data Systems
- Several overview pieces of U.S. Gaming Companies, a compendium of all American gaming companies, many of which were acquired in the 2007 LBO boom wave
If Mr. Shah allegedly leaked the Hilton information on a few minutes notice in exchange for $10,000, and he was presumably also in possession of material "take private" information on many other companies in his coverage list, we suggest the SEC focus on any and all odd activity around LBOs that Mr. Shah may have been responsible for, especially in the 24 hour advance notice period that only rating agencies inexplicably are privy to such very material, non-public information, and which, the allegation goes, they have been so successful in leaking to the highest bidders.
Oh, and a regulatory idea: immediately do away with the practice of giving Moody's or S&P any advance notice of LBOs (not that there will be many of those in the foreseeable future). In fact, do away with the practice of giving rating agencies any material non-public information period. And, even more in fact, do away with the rating agencies in total. After all their existence is merely there to generate page views for blogosphere which fills its content extolling their endless stupidity and corruption.