For immediate release: February 3, 2015
Contact: Laura Swinford, SOS
(573) 522-2592
Nanci Gonder, AGO
(573) 751-8844
Attorney General Koster and Secretary of State Kander announce Missouri to receive $21.5 million settlement
Standard and Poor’s to pay record sum in nationwide agreement
(Jefferson City, Mo) Attorney General Chris Koster and Secretary of State Jason Kander today announced a settlement with McGraw Hill Financial, Inc., and its wholly owned subsidiary Standard and Poor’s Financial Services, LLC (S&P), resolving the State’s claims alleging securities fraud and deceptive business practices. Under the terms of the settlement, S&P will pay the state of Missouri $21,535,714, which will be transferred to the state’s general revenue fund. Once in general revenue, the settlement funds will be eligible to be used for important priorities throughout the state.
Koster and Kander filed suit in February 2013, charging S&P with four counts of securities fraud and one count of consumer fraud. They alleged that, despite S&P’s promise to rate investment opportunities independently and objectively, the rating agency allowed its analysis to be influenced by its desire to earn lucrative fees from its investment bank clients, to the detriment of investors and other market participants. The lawsuit alleged that, in an effort to drum up more business for S&P, the agency knowingly assigned inflated credit ratings to toxic assets packaged and sold by the Wall Street investment banks.
Koster and Kander filed their lawsuit in parallel with suits filed by the U.S. Department of Justice and 19 other states and the District of Columbia. Twenty-nine states chose not to take action against S&P for the agency’s fraudulent conduct, and thus will receive nothing in the settlement. Two states, New York and Massachusetts, chose to pursue investigation against S&P separate from the larger multi-state action, and recently settled with the company for approximately $12 million and $7 million, respectively.
“The consequences of S&P’s irresponsible decisions can still be felt beyond Wall Street,” Kander said. “This settlement holds S&P accountable for misleading Missourians and investors nationwide in the run-up to one of the greatest financial crises in our country’s history. I’m proud that our work will result in over $21 million going to worthy projects throughout our state.”
In addition to the financial settlement, S&P has agreed to a statement of facts (http://www.ago.mo.gov/SPStatementOfFacts.pdf) acknowledging conduct related to its analysis of structured finance securities. McGraw Hill and S&P also are required by the settlement to comply with Missouri’s consumer protection and securities laws.
“In order for the markets to function properly, investors must be able to rely on unbiased information about the potential risks they are assuming when they make investments,” Koster said. “S&P admitted to issuing ratings that were not objective and independent, and now will pay Missouri more than $21 million for their unlawful conduct.”
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Visit www.sos.mo.gov to learn more about the Office of the Missouri Secretary of State.
