S&P, McGraw Hill Financial Inc. Paying Out Billions of Dollars in Settlement

03-17-2015
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Standard and Poor Financial Services LLC (S&P), a McGraw Hill Financial Inc. subsidiary reached an agreement with the United States Justice Department to pay out a $1.38 billion settlement over accusations that the company deliberately inflated risky mortgage investment ratings, and helped cause the financial crisis of 2008. From 2004-2007 S&P hiked up ratings for high risk mortgage securities, which allowed banks to sell these securities and make trillions of dollars in profit. Typically, this type of investment cannot be made unless the securities have high credit ratings, and the investments spoiled with the housing market collapse in 2006. A couple years ago, civil fraud charges were filed against S&P by the Justice Department due to the fact that the company did not warn investors of the impending housing market collapse, because it was afraid it would reflect poorly on business for the company. “While this strategy may have helped S&P avoid disappointing its clients, it did major harm to the larger economy, contributing to the worst financial crisis since the Great Depression,” Attorney General Eric Holder stated in regards to the lawsuit.

The Justice Department had originally asked for $5 billion when it filed the lawsuit in 2013, but was able to reach the current settlement without an admission of guilt from S&P.

This agreement is a major step in the government’s efforts to hold responsible companies that significantly contributed to the 2008 financial crisis by withholding valuable, event altering information for personal financial gain. It is believed that this settlement can be grounds for action against two other rating agencies believed to be responsible, Moody’s Investors Service, and Fitch Ratings.

S&P has also agreed to pay more than $77 million by the Securities Exchange Commission in separate settlements to the states of New York and Massachusetts for crimes related to high-risk mortgage securities after the financial crisis, as well as another separate settlement to the California Public Employees’ Retirement System of $125 million regarding ratings for retirement investments.

If you or a loved one have fallen victim to misleading and fraudulent business practices from companies like Standard and Poor Financial Services, the lawyers of Hodes Milman Liebeck can provide you with the assistance you need. Contact us today online at hmlm.com or call 866-730-1976 for a complimentary case evaluation.

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