United States to sue Standard & Poor’s over ratings
By Meena Haseeb - Tue Feb 05, 9:46 am
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.