“Standard & Poor’s Ratings Services could face a much higher legal bill than the $5 billion sought by the federal government as more and more states join the battle against the credit-ratings firm.
A raft of lawsuits this week from attorneys general from several states, including California and Iowa, is compounding S&P’s legal woes over its role during the financial crisis of 2008-2009.
On Tuesday, the Justice Department sued S&P for allegedly causing some banks and credit unions to lose $5 billion after relying on the company’s ratings of mortgage-linked securities.
However, the $5 billion claim, which S&P has dismissed as “meritless,” is only part of the legal battle being fought by the world’s largest credit-ratings firm by number of deals rated.
Thirteen states and the District of Columbia have followed in the Justice Department’s footsteps, filing separate lawsuits against S&P on Tuesday. The California attorney general alone is suing S&P for about $4 billion to recover funds for two of the country’s largest public pension funds, according to its lawsuit.
Other states, such as Colorado and Arkansas, are demanding S&P give back the revenue it earned on precrisis ratings of hundreds of securities. State prosecutors allege S&P presented its ratings as based on objective and independent analysis but actually were inflated to cater to the banks that helped arrange and sell the securities.
In a statement Wednesday, an S&P spokesman said “any allegations that we compromised our analytic integrity for business considerations are simply false.”
Not all of the states’ lawsuits specify the amount they are seeking. However, a 2011 Senate report pegged S&P’s revenue on mortgage-related securities at $2.3 billion from 2002 to 2007….”
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