State: S& P’s ‘ guesses’ cost pension funds $ 1 billion
California has filed suit against Wall Street’s biggest credit rating agency, Standard & Poor’s, charging the firm with violating the state’s False Claims Act by using “magic numbers” and “guesses” to inflate ratings that ultimately cost California public pension funds an estimated $ 1 billion.
The action was filed Tuesday in San Francisco Superior Court and came a day after federal prosecutors filed suit against the bond- rating agency, alleging that S& P gave top marks to troubled mortgagebacked securities that later failed, helping to trigger the financial crisis.
California will seek $ 4 billion in damages after S& P’s ratings cost state pension funds what it estimates are about $ 1 billion in losses. The state can seek triple damages, along with penalties, under the False Claims Act.
“Those who lost homes in California were firstgrade teachers, firefighters ... we talk about the impact of S& P’s conduct, it’s profound,” Attorney General Kamala Harris said in Washington after announcing the federal and state suits.
S& P, which is a unit of publisher McGraw Hill, on Tuesday denounced the state and federal actions.
“The U. S. Department of Justice and some states have filed meritless civil lawsuits against S& P,” the company said in a statement. “We will vigorously defend S& P against these unwarranted claims. S& P has always been committed to serving the interests of investors and all market participants by providing independent opinions on creditworthiness based on available information.”