The judges have been judged, and found wanting.

On Tuesday, after a nearly year-long investigation, the Securities and Exchange Commission finally published its report of the internal workings of credit ratings agencies Fitch, Moody's and Standard & Poor's and the results aren't pretty.

SEC Chairman Christopher Cox said at a news conference that "conflicts of interest were not always managed properly." He added, "there were generalized concerns about laxity, about adherence to stated norms."

The report divulged many shady practices that fly in the face of existing rules without naming any names. Since this is a three-company line-up, it's not as if the offenders are escaping without a smudged reputation.

The report, which focused on rating of RMBS and CDOs, found that though they all restrict analysts involvement in fee discussions, they all allow key participants in the rating process to be in on fee negotiations. The regulatory investigation also found that "employees discussed concerns about the firm's market share relative to other rating agencies, or losing deals to other rating agencies."

The conflict of instance was often blatant: "In most of these instances, it appears that rating agency employees who were responsible for obtaining ratings business (i.e., marketing personnel) would notify other employees, including those responsible for criteria development, about business concerns they had related to the criteria."

In a subprime e-mail sent in September of 2006, an analyst wrote: "We are meeting with your group this week to discuss adjusting criteria for rating CDOs of real estate assets this week because of the ongoing threat of losing deals."

While the Market looked to credit ratings as hallowed indicators of worth, the agencies had trouble funding all the resources required. One analytical manager wrote: "Our staffing tensions are high. Just too much work, not enough people, pressure from company, quite a bit of turnover."

One of more suspicious findings was that so many of the ratings processes were simply undocumented. For instance, the names of approval committee members were often omitted in direct violation of regulatory requirements. Also, none of the rating agencies examined had specific written procedures for rating RMBS and CDOs.

Also, when one quantitative model would be swapped for another, the SEC found that "in many cases the rating agency did not have documentation explaining the rationale for the adjustments, making it difficult or impossible to identify the factors that led to the decision to deviate from the model." The report also said "an internal audit indicated that certain relevant information, including committee attendees and quorum confirmation, were sometimes missing from committee memos," though the staff noted improvements in this area during the review period.

In the wake of a projected trillion dollars in subprime write-downs it's no comfort to investors who bought up residential mortgage debt that has now tanked to know that each rating agency's Code of Conduct clearly stated that "it was under no obligation to perform, and did not perform, due diligence."

Meaning, the firms did nothing to verify the quality of underlying assets they rated and were not even required to insist that issuers perform due diligence. This disconnect between raters and underwriters contributed to the inflated value of subprime debt. (See "Lipstick On A Pig")

Since the review began the SEC said, "all of the rating agencies examined have implemented, or announced that they will implement, measures that are designed to improve the integrity and accuracy of the loan data they receive on underlying RMBS pools."