CHICAGO -- Six black and Hispanic employees at Moody's Investors Service are planning to file a class action lawsuit within 30 days charging the agency with keeping them from advancing to positions of responsibility, the attorney for the plaintiffs said yesterday.
Leonard N. Flamm, the attorney, said he was preparing the suit on behalf of six current Moody's employees in the public finance, corporate finance, financial information services, and contract services departments. However, he declined to say who the employees are until their names become public with the filing of the suit.
"My clients have told me the whole point of the lawsuit is that Moody's is a lily-white company when you get to a position of responsibility," Mr. Flamm said. "Sure there are blacks there , but holding lower-level jobs without moving up."
He added that, to his knowledge, no blacks or Hispanics held positions in middle and upper management at Moody's.
The allegations contained in the lawsuit come on the heels of a remark made by a spokesman for Mayor Coleman Young of Detroit concerning the racial makeup of analysts that are involved in rating the city's outstanding debt.
Bob Berg, the spokesman, said last week that there are no minorities in the section of Moody's that deals with Detroit debt. Mr. Berg made the comment after Moody's dropped the rating for $272 million of the city's outstanding general obligation debt below investment grade, to Ba 1 from Baa, last Thursday.
Jeffrey Rizzo, a vice president and managing director at Moody's, declined to comment Friday on the racial makeup of the ratings officials.
Paul Rumely, a vice president and managing director of human resources at Moody's also declined yesterday to comment on how many minorities the company employs.
As for the impending lawsuit, Mr. Rumely said it was the company's policy not to comment on "internal personnel matters."
"We feel it is inappropriate," he said. "It is in the best interest of Moody's and any individual who is involved not to comment."
Mr. Flamm said the class of current and former Moody's employees to be included in the suit is made up only of blacks and Hispanics at this point and that he did not comtemplate that other racial or ethic groups would be added in the future. The lawsuit does not allege discrimination on the basis of sex, he added.
The class would included blacks or Hispanics formerly or currently employed in positions that have "a career track or line of advancement" at Moody's, he added.
Mr. Flamm said the suit will probably be filed within the next 30 days in the U.S. District Court for the Southern District of New York. The suit will address "systemic practices" of discrimination at Moody's in terms of "activities that are going on in the New York office that in one way or another are causing non-promotions of blacks and Hispanics," he said.
The suit seeks to have Moody's alter its practices of hiring and promoting blacks and Hispanics and establishing a program to ensure that members of the two minority groups are promoted, Mr. Flamm said. A claim for monetary relief tied to back pay for the class probably will be included in the suit.
The lawsuit, which covers the time period from July 1989 to the present, could be extended to include black and Hispanic employees at other Moody's offices nationwide, but that has not yet been decided, Mr. Flamm said.
Mr. Rumely said Moody's has only one "small" office outside of New York in San Francisco, although the company has five offices overseas. He added that the firm's main activities are in the areas of public finance, corporate finance, and financial information services, which is in charge of the company's publishing arm.
Mr. Flamm said he filed a complaint on behalf of his clients with the Equal Employment Opportunity Commission on June 22 in New York, adding that he was not aware of any response to the complaint by Moody's.
James Lee, regional attorney for the commission in New York, said that he could not comment on individual complaints.
Mr. Lee said that the commission typically would contact a company regarding a complaint within 10 days of the filing, thereby launching the investigation into the complaint.
He said that if the commission makes a determination that the Federal Employment Act has been violated, it would attempt to resolve the problem with the firm but if no resolution is reached, the commission could file suit in federal district court.
Mr. Rumely decline to comment on the complaint.
In 1988, Mr. Flamm was the attorney for a class-action suit filed by former Merrill Lynch Capital Markets employees charging the firm with age discrimination. Mr. Flamm said that lawsuit was settled out of court for "a substantial settlement" in late 1991. He declined to comment on the amount of the settlement.
Mr. Flamm said the lawsuit against Moody's makes no statements or charges regarding the rating agency's competence or ability in what it does."
Still, Mr. Flamm said it was ironic that discrimination should exist at a firm that is in the business of judging others.
"There are some ironies," Mr. Flamm said. "Here's Moody sitting in judgment [of companies and governments] and its own backyard needs cleaning."
In his reaction to the downgrade of its GO debt, Mayor Young charged that Moody's had applied "substantially different" criteria in rating Detroit's debt than the agency uses to rate "any other large American city." When asked if the mayor was implying that Moody's considered the fact that Detroit's population is mostly black or minority in its rating decision, Bella Marshall, the city's finance director, said last week that one of the things inherent in urban America is a large number of minorities.
Detroit officials also expressed confusion as to what criteria Moody's was using to rate the city. Teresa Blossom, a spokeswoman for Mayor Young, said yesterday that that J. Chester Johnson, president of Government Finance Associates Inc., Detroit's financial adviser, was "having a dialogue with Moody's" about the rating decision. Mr. Johnson did not return phone calls.
Paul Devine, a vice president and manager of the Great Lakes region at Moody's, said yesterday that while he was not aware of any scheduled meetings with Detroit officials, he expected to "continue communicating with Detroit on credit matters and any other matters relative to our relationship with them."
In its ratings release on Detroit, Moody's said the downgrade was the result of "weak fundamentals, which detract from long-term credit quality, despite the city's history of continued efforts to maintain control over its budgetary operations."
