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The chairman of the U.S. House Oversight Committee on Wednesday expressed disbelief that an outside investigation of complaints against Moody's was being conducted orally and won't conclude with a formal written report.

Chairman Edolphus Towns, D-N.Y., made his comments at the close of a hearing where two ex-Moody's employees told lawmakers they believe Moody's still faces conflicts of interest, inflates its ratings and failed to update stale ratings on municipal bonds.

"This morning we learned that this outside firm was given only oral instructions. Moody's says there is no written statement of work and no contract," Towns said. "This outside firm is not expected to produce any written report of its findings and has no schedule for completion."

"In other words, the Moody's business model could be summed up as 'Leave No Fingerprints,'" Towns added.

Moody's Corp. (MCO) in late July hired Kramer Levin Naftalis & Frankel after former employee Eric Kolchinsky wrote a draft internal memo raising his concerns.

Kolchinsky was suspended from the company on Sept. 3. He contacted the Securities and Exchange Commission a few days later.

A Moody's spokesman said the company provided Kramer Levin copies of Kolchinsky's written concerns and asked the law firm to report its findings to senior management, the company's board and regulators. The law firm has already interviewed 22 Moody's employees.

"Moody's has pledged its full cooperation with the investigation, but has not dictated the scope or timing of Kramer Levin's work," the spokesman said. "Moody's has full confidence in this process."

Moody's chief credit officer Richard Cantor told lawmakers at the hearing that preliminary findings by the outside firm showed that Kolchinsky's complaints were "unsupported."

At the hearing, Towns said he wants to see documents from the outside probe into Kolchinsky's claims, and Cantor said he thought the company would be able to comply.

But a few hours later Towns said Moody's told the committee there are no documents. "Kramer Levin says this is their 'normal' behavior - they never produce written reports," Towns said.

Kolchinsky was suspended in September after he refused to meet with a lawyer from Kramer Levin without his own legal representative present.

A second former Moody's employee, former chief compliance officer Scott McCleskey, testified at the hearing. McCleskey's testimony focused on March discussions he had with the SEC about the 2008 replacement of compliance officers with analysts and managers who were previously involved in rating structured-finance and mortgage securities. He said he was "pushed out" by Moody's in September last year.

- By Sarah N. Lynch, Dow Jones Newswires; 202-862-6634; sarah.lynch@dowjones.com

(Serena Ng contributed to this article.)