Wall Street rating agencies finally facing justice for deceiving investors
By Alejandro Lazo, LA Times
10:42 AM PST, February 5, 2013
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 mortgage-backed 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 first-grade teachers, firefighters ... we talk about the impact of S&P’s conduct, it’s profound,” Atty. Gen. Kamala D. Harris told the Times in Washington after a news conference there announcing the federal and state suits. “They pretended to be an independent agency and we believe the evidence is clear it was quite the contrary.”