Morningstar Beefs Up Ratings Business With Controversial Tillman Hire


Last week Morningstar, Inc. made its latest move to beef up its ratings business by hiring Vickie Tillman as president of its ratings division.  Ms. Tillman’s hire has been viewed by some as controversial as she oversaw S&P’s Ratings business during the financial crisis and meltdown of the mortgage securities market.

Hiring by Morningstar

Effective September 3rd, Vickie Tillman will join Morningstar as president of Morningstar Credit Ratings, LLC and will oversee the day-to-day operations of the structured credit research and ratings business.  Ms. Tillman will report to Haywood Kelly, Morningstar’s SVP of equity and credit research.

Ms. Tillman most recently oversaw green initiatives at McGraw-Hill in her role as senior vice president of global strategy—sustainability for the McGraw-Hill Global Strategy Group at McGraw-Hill Companies.  She joined McGraw-Hill Companies in 1977 and worked for more than 30 years in various positions for its Standard & Poor’s Ratings Services business.

Commenting on her hiring, Tillman said “I’m excited to join Morningstar’s structured credit team and become part of the company’s efforts to bring transparency to the industry and help investors understand and evaluate investments in this space. I was attracted to Morningstar because of the company’s distinctive investor focus, high-quality research and analytics, and unique business model.”

Role With S&P Ratings

However, it is Ms. Tillman’s previous role as Executive Vice President and Global Business Head of S&P Ratings Services which has been largely ignored by Morningstar in their public announcements of her hiring and which have garnered the most negative attention from some in the press.

Tillman ran S&P’s ratings business during and after the financial crisis, and she represented S&P in hearings before Congress investigating the financial crisis.  Asked to comment on Ms. Tillman’s work while at S&P ratings, a Morningstar spokesperson made the following emailed response:

“Vickie has a wealth of experience and strong analytical skills. She is a strong proponent of investor education, transparency, and governance — which align with our mission. The industry problems went well beyond one individual or a set of individuals. We’ve hired a number of employees who had previous experience at other rating agencies. We think she’ll be a positive addition to our team.”

Government Lawsuit of S&P

In February 2013 the Justice Department filed a $5.0 bln civil lawsuit against S&P alleging that the ratings firm defrauded investors by issuing overly positive ratings for mortgage-backed securities which purposely underestimated the risks of these instruments.  This was the first time the government had taken action against a credit rating agency over illegal behavior tied to the recent financial crisis.

Both retail and institutional investors lost billions of dollars during the 2007-2009 financial crisis, due in large part to massive losses triggered by risky mortgage loans packaged and sold to investors, often with top ratings from credit raters like S&P.

Many industry sources say they expect a protracted legal battle between S&P and the U.S. government over the lawsuit that could last years to resolve.

Beefing Up Morningstar’s Ratings Efforts

Despite the controversy surrounding her background, the hiring of Vickie Tillman must be viewed an important step in Morningstar’s development of a credible new credit ratings firm.

Since the division’s founding in December 2009, Morningstar has been steadily expanding its credit research and ratings business with the goal of providing an alternative to the big credit ratings companies like Moody’s or Standard & Poor’s that some feel are conflicted because they are paid by the companies whose securities they rate.

Morningstar Credit Ratings, LLC is a Nationally Recognized Statistical Rating Organization (NRSRO) that specializes in structured credit research and ratings, including commercial mortgage-backed securities (CMBS).

Due to the division’s focus, Morningstar Credit Ratings is the only NRSRO providing comprehensive ratings coverage for most CMBS securities in the secondary market.  Morningstar currently provides ratings for more than 600 CMBS deals and more than 6,000 CMBS securities. Morningstar’s monthly surveillance process also provides timely reviews of credit events affecting the CMBS market.



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