Standard & Poor’s Sued Over Inflated Ratings on Structured Debt Securities

LOS ANGELES - (Mealey's) The U.S. government on Feb. 5 announced the filing of a lawsuit in California federal court against Standard & Poor's Ratings Services alleging that the ratings agency lied about its objectivity and independence and issued inflated ratings on certain structured debt securities (United States of America v. McGraw-Hill Companies Inc., et al., No. 13-0779, C.D. Calif.).

The government filed the lawsuit in the U.S. District Court for the Central District of California, naming McGraw-Hill Cos. Inc. and subsidiary Standard & Poor's Financial Services LLC (collectively, S&P) as defendants.

The government alleges that from September 2004 to October 2007, S&P "knowingly and with the intent to defraud, devised, participated in, and executed a scheme to defraud investors in RMBS [residential mortgage-backed securities] and CDO [collateralized debt obligation] tranches, including federally insured financial institutions, as to material matters, and to obtain money from these investors by means of material false and fraudulent pretenses, representations, and promises, and the concealment of material facts."

FIRREA

The government states claims for mail fraud, wire fraud and financial institution fraud under the Financial Institution Reform, Recovery and Enforcement Act.

The government is represented by Stuart F. Delery, Maam Ewusi-Mensah Frimpong, Michael S. Blume, Arthur R. Goldberg, James T. Nelson, Bradley Cohen, Jennie Kneedler, Sondra L. Mills and Thomas D. Zimpleman of the Department of Justice in Washington, D.C., and U.S. Attorney Andre Birotte Jr. and Assistant U.S. Attorneys George S. Cardona, Leon W. Weidman, Anoril Khorshid and Richard E. Robinson in Los Angeles.

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