DOJ announces $1.375 billion settlement with S&P News
DOJ announces $1.375 billion settlement with S&P

[JURIST] The US Department of Justice (DOJ) [official website] announced [press release] Tuesday that, after two years of litigation, Standard & Poor’s (S&P) [corporate website] on Monday reached an agreement [settlement agreement, PDF] to settle a series of lawsuits [DOJ backgrounder, PDF] for $1.375 billion. The lawsuits accuse the credit rating firm of defrauding investors and sending out inaccurate ratings on mortgage securities as a way to drum up more business, contributing to the 2008 financial crisis. The US government, including the DOJ and several states, all filed lawsuits against the company over their ratings, which were said to have caused hundreds of millions of dollars in losses. $687.5 million will be paid to the DOJ, while 19 states and the District of Columbia will receive $687.5 million. Public pension fund California Public Employees’ Retirement System [official website] will receive a $125 million settlement. In the past, S&P accused the federal government of retaliating against the firm for downgrading the government’s credit rating in 2011. However, as part of the settlement, S&P acknowledged that it has no evidence to support the claims of retaliation. The company also acknowledged, without admitting any legal violations, that in 2005, executives delayed the use of new models that would produce negative ratings.

S&P was accused in a 2011 congressional report of issuing ratings that made risky securities investments appear safe. S&P, along with rival Moody’s Corp [official website] were force to downgrade their inflated ratings, triggering the 2008 financial crisis. The US originally sued S&P seeking $5 billion, but talks broke down in 2013. The California Public Employees’ Retirement System sued S&P in 2009 for financial losses.