Standard & Poor’s, the nation’s largest rating firm will pay $1.5 billion to resolve a series of lawsuits by the government over its ratings on mortgage securities that impacted the 2008 financial crisis.In a 119-page complaint, the government said S&P delayed updates to its ratings criteria and analytical models between September 2004 and October 2007, weakening its criteria in a desire to gain more business from the investment banks that issued the securities.
The settlement comes after more than two years of litigation as S&P fought allegations it issued improperly favorable ratings in order to win more business.
S&P parent McGraw Hill Financial Inc (MHFI.N) said it will pay $687.5 million to the U.S. Department of Justice, and $687.5 million to 19 states and the District of Columbia, which had filed similar lawsuits over the ratings.
The firm also reached a separate $125 million 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.
“On more than one occasion, the company’s leadership ignored senior analysts who warned that the company had given top ratings to financial products that were failing to perform as advertised,” said Attorney General Eric Holder said in announcing the settlement.
Jeffrey Newman represents whistleblowers