Posted on 20 Nov 2009
Ohio Attorney General Richard Cordray has filed suit against ratings agencies Standard Poor's Ratings Services, Moody's Investors Service and Fitch Ratings, alleging they provided misleading ratings in exchange for money.
The suit, filed in U.S. District Court on behalf of five Ohio public employee retirement and pension funds, charges the agencies with "wreaking havoc on U.S. financial markets by providing unjustified and inflated ratings of mortgage-backed securities in exchange for lucrative fees from securities issuers."
The funds lost an estimated more than $457 million because of the investments, Mr. Cordray said. The agencies gave many of the investments the highest-possible investment-grade credit ratings, normally given to the safest corporate bonds in part because of fees they got from the securities issuers, he said.
"The rating agencies assured our employee pension funds that many of these mortgage-backed securities had the highest credit ratings and the lowest risk," Mr. Cordray said. "But they sold their professional objectivity and integrity to the highest bidder."
It's not the first time ratings agencies have been sued with relation to the economic crisis. New York state Attorney General Andrew Cuomo reached an agreement as part of a settlement with firms last year to overhaul the way they collect fees.
Agencies in the past have argued against suits, saying their opinions are protected by free speech.