Reuters: Regulatory News: UPDATE 1-Mizuho to pay $127.5 mln to settle SEC case

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UPDATE 1-Mizuho to pay $127.5 mln to settle SEC case Jul 18th 2012, 20:06 Wed Jul 18, 2012 4:06pm EDT By Sarah N. Lynch and Aruna Viswanatha WASHINGTON July 18 (Reuters) - Mizuho Financial Group Inc has agreed to pay $127.5 million to settle U.S. regulatory charges that its U.S. investment banking unit misled investors in a $1.6 billion collateralized debt obligation by obtaining false credit ratings. The U.S. Securities and Exchange Commission charges, the latest to come out of the 2007-2009 financial crisis, accused Mizuho Securities USA Inc of using "dummy assets" in a complex product better known as a "CDO" in order to obtain a rosier credit-rating. CDOS are bundles of securitized mortgages. Leading up to the financial crisis, many of the mortgages included in the CDOS consisted of subprime loans that later soured. The CDO at the center of the SEC's case has been one of the more high-profile deals to be scrutinized in the aftermath of the financial crisis. Known as "Delphinus" it was highlighted in a report issued by a Senate investigative panel last year as an example of how poorly rated structured products helped fuel the financial crisis. The SEC's settlement with the Mizuho calls for a $115 million civil penalty, the disgorgement of $10 million of fees, and the payment of $2.5 million of interest. Mizuho did not admit or deny the SEC charges in agreeing to settle. "Mizuho cooperated fully with the SEC throughout this process. The firm agreed to the settlement to avoid protracted litigation and distraction and believes the settlement is the right outcome for its shareholders, clients and employees," the company said in a statement. The SEC said it also settled proceedings against three former Mizuho employees responsible for the Delphinus CDO 2007-1 transaction. They are: Alexander Rekeda, who led the group that structured the CDO; Xavier Capdepon, who modeled the CDO for rating agencies; and Gwen Snorteland, the transaction manager responsible for structuring and closing the CDO. An attorney for Rekeda said his client was pleased to put the matter behind him. Attorneys for the other two former employees did not immediately respond to a request for comment. Link this Share this Digg this Email Reprints

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