Credit rating agency Standard & Poor’s has reached a USD 1.5 billion settlement to resolve a collection of legal cases accusing it of inflating the ratings related to mortgage securities at the center of the 2008 Great Recession.
The agreement for settlement arrives after over two years of litigation as the world’s biggest rating company left no stone unturned to beat back all the allegations that it gave excessively rosy ratings for winning more business.
McGraw Hill Financial Inc, Standard & Poor’s parent firm, said that it will be paying USD 687.5 million to the US Department of Justice, while another USD 687.5 million will be paid to 19 states and the District of Columbia, which had also filed similar legal cases over the biased ratings.
Under the settlement, S&P admitted that it has not uncovered the evidence to back the allegations of retaliation.
Calling the allegation as “utter nonsense” at a news conference, Attorney General Eric Holder said, “290 million documents have been examined. We could look at 290 million more, and you’ll find absolutely no indication that was the reason why this investigation was begun, why this settlement was reached.”
Late Monday, the rating company reached a separate settlement of USD 125 million with public pension fund California Public Employees’ Retirement System.
The Retirement System had filed lawsuit against S&P in the year 2009 while accusing the agency’s ‘inaccurate’ ratings causing it hundreds of millions of dollars in losses.
In 2013, the US had filed lawsuit against S&P seeking USD 5 billion following the breakdown of initial settlement talks, and also accused the ratings agency of defrauding the investors. S&P described the case as retaliation against the agency’s ratings that downgraded the credit rating of the US. According to S&P, its ratings were completely protected under the First Amendment right to free speech.