November 01, 2014

United States to sue Standard & Poor’s over ratings

By Meena Haseeb - Tue Feb 05 2013, 9:46 am

http://www.khaama.com/wp-content/uploads/2013/02/US-file-lawsuit-against-Standard-Poors-over-ratings.jpgStandard & Poor’s said it expects to be the target of a U.S. Department of Justice civil lawsuit over its mortgage bond ratings over alleged illegal behavior tied to the recent financial crisis.

The charges would mark the first enforcement action the government has taken against a major rating agency however the credit risk agency promised a vigorous defence, saying the looming lawsuit would be “entirely without factual or legal merit.”

US prosecutors have questioned former S&P analysts on whether the firm ignored its own standards when rating the securities because of fees from investment banks, according to a report in the Wall Street Journal.

The two sides have discussed a possible settlement for about four months, according to people close to the negotiations, but S&P balked over concerns that a deal could sink the company.

In the meantime the New York Times in a report said, the lawsuit will likely be brought this week after settlement talks between the department and S&P broke down last week.

The talks collapsed over federal authorities’ insistence that a settlement involve at least $1bn, the Times reported.

Shares of McGraw-Hill Cos, the parent of S&P, plunged 13.8% on Monday after news of the pending lawsuit surfaced, their biggest one-day percentage decline since the 1987 stock market crash, according to Reuters data.

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