S&P to pay $1.5b to resolve financial crisis lawsuits
Standard & Poor's, the world's leading credit rating agency, will pay $1.5 billion to settle US allegations of inflated ratings linked to the financial crisis that unleashed the Great Recession.
The settlement agreements announced Tuesday resolve civil lawsuits filed by the US Justice Department, 19 states, the US capital and the nation's largest pension fund.
S&P, a unit of McGraw Hill Financial, will pay $1.375 billion to resolve lawsuits accusing it of bilking investors by hiding the true risks of mortgage bonds linked to the financial crisis, the Justice Department.
Half will go to the Justice Department and the other half to the 19 states and Washington, DC.
Separately, S&P will pay $125 million to California state pension fund CalPERS to settle allegations of fraud that led to its investment losses.
The Justice Department and the states sued S&P two years ago for giving undeservedly rosy ratings to bonds that were backed by subprime mortgages, risky home loans that defaulted in droves as the housing price bubble collapsed.
The subprime crisis was at the center of the US financial meltdown that led to the 2008-2009 Great Recession.
According to the Justice Department suit, S&P's alleged fraud occurred from at least 2004 until 2007 and ultimately caused investors, including many financial institutions backed by the federal government, to lose billions of dollars.
S&P had claimed that its ratings were independent and not affected by its relationship with the companies hiring it to rate their securities.
Comments