2009 – the year of information liability?
Jinfo Blog

31st December 2008

By Tim Buckley Owen

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As if a global economic meltdown weren’t enough, we now have the biggest alleged Ponzi scheme of all time – and it’s hardly surprising that investors are looking for experts to blame. Taken with other developments, it could well mean that liability is the big issue of 2009. According to the FT http://digbig.com/4ybgs Fairfield Greenwich, the fund likely to be the biggest loser from investments with Bernard L Madoff Investment Securities, is considering suing its own accountants PwC for failing to detect the alleged fraud. KPMG and Ernst & Young could be targets for legal action too, the FT says, since they also audited the Madoff feeder funds. Meanwhile the FT additionally reports http://digbig.com/4ybgt that UBS is seeking to absolve itself from any duty to safeguard investor assets in a $1.4 billion fund that also channelled money into Madoff. ‘The Swiss bank used an agreement that denied it was responsible for the assets – even though its marketing documents claimed it would be,’ the FT said. Accountants and investment banks aren’t the first institutions facing the likelihood of increased liability for their actions as a result of 2008’s upheavals. It’s been a bad year for credit rating agencies, and they too face the prospect http://www.vivavip.com/go/e14019 of legal liability in Europe for their recommendations. The markets have spent much of 2008 punishing the agencies for their failings. In a recent Outsell Insight, Credit Information and Rating Services: No Relief from the Credit Crunch http://www.outsellinc.com/store/subscription/insights (subscription required), Joachim Bartels of Outsell affiliate Intrepid Explorers points out that the latest revelations have pushed the value of McGraw-Hill (owner of Standard & Poors), Moody's and Fair Isaac down by more than 60% compared with July 2007 when the credit crunch first hit, with Experian and Equifax down by more than 40% and D&B by 30%. Talking to VIP LiveWire last September, Outsell’s Kate Worlock also commented http://www.vivavip.com/go/e11696 on the big problems the agencies were facing – even though credit companies usually do well out of a downturn. And to complicate matters further, Bartels’ Insight also points out that LexisNexis is building a $1.8 billion risk information and analytics business based on its acquisition of ChoicePoint. ‘We knew that customers and users were using our information in order to vet potential clients, because they have a legal obligation to comply with anti-money laundering requirements,’ LexisNexis’s UK boss Josh Bottomley told FreePint’s VIP magazine http://www.vivavip.com/ (subscription required) in an exclusive interview last August. ‘It’s a very natural step from there to say we can use some technology to help the whole process.’ It all points towards individual companies taking much more direct control over the ‘expert’ opinions they use. Plus, of course, some great opportunities for astute information professionals.

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