New York: Credit rating firm Standard & Poor’s will pay $1.5bn to resolve a collection of lawsuits over its ratings on mortgage securities that soured in the run-up to the 2008 financial crisis, concluding one of the US government’s most ambitious cases tied to the housing collapse.
The settlement comes after more than two years of litigation as S&P tried to beat back allegations that it issued overly rosy ratings in order to win more business.
S&P parent McGraw Hill Financial Inc said it will pay $687.5m to the US Department of Justice, and $687.5m to 19 states and the District of Columbia, which had filed similar lawsuits over the ratings.
Late Monday, the firm reached a separate $125m settlement with public pension fund California Public Employees’ Retirement System, which had sued S&P in 2009, claiming its inaccurate ratings caused the firm hundreds of millions of dollars in losses. The United States sued S&P in 2013 after initial settlement talks broke down, seeking $5bn and accusing the ratings agency of defrauding investors. S&P argued that its ratings were protected under the First Amendment right to free speech, and described the lawsuit as retaliation for the firm downgrading the credit rating of the United States.
Under the settlement, S&P acknowledged it has not uncovered evidence to support the allegations of retaliation. S&P did not admit to any violations of law, but it did sign a statement of facts acknowledging that its executives in 2005 delayed implementing new models that produced more negative
ratings.Reuters
