Multiple settlements were announced Tuesday between the parent of Standard & Poor’s Ratings Services and the federal government, state governments and a retirement fund.
One of the settlements was reached with the U.S. Department of Justice and “fully resolves” a federal civil lawsuit filed in 2013 by the government in Los Angeles.
The government alleges in its complaint that S&P
defrauded investors in residential mortgage-backed securities and collateralized obligations.
The alleged scheme occurred from 2004 until 2007.
Losses from the alleged fraud reportedly reached “billions of dollars.”
“S&P falsely represented that its ratings were objective, independent, and uninfluenced by S&P’s relationships with investment banks when, in actuality, S&P’s desire for increased revenue and market share led it to favor the interests of these banks over investors,” the Justice Department said in a 2013 announcement.
Defendants in the Justice Department’s case are
McGraw Hill Companies Inc. and subsidiary Standard & Poor’s Financial Services LLC.
After the federal government filed its complaint, lawsuits were filed against the New York-based company by multiple states.
McGraw Hill Financial Inc. issued a statement indicating that it reached a settlement with the U.S. Department of Justice and attorneys general in 19 states and the District of Columbia.
Terms of the settlement require McGraw Hill to pay the U.S. Department of
Justice $687.5 billion.
Another $687.5 will be paid to the states.
The settlement was reached in order for all parties “to avoid the delay, uncertainty, inconvenience and expense of further litigation.”
“After careful consideration, the company determined that entering into the settlement agreement is in the best interests of the company and its shareholders and is pleased to resolve these matters,” McGraw Hill said.
In addition to the government settlements, McGraw Hill reached a $125 million settlement with
the California Public Employees’ Retirement System.
The CalPERS
agreement is tied to ratings on structured investment vehicles.
McGraw Hill said it takes compliance with post-crisis rules and regulations “very seriously.” Investments are being made in human and technological resources to strengthen risk-management controls.
