Justice Department wants states to decide S&P lawsuits

WASHINGTON Fri Mar 29, 2013 5:35pm EDT

A view shows the Standard & Poor's building in New York's financial district February 5, 2013. REUTERS/Brendan McDermid

A view shows the Standard & Poor's building in New York's financial district February 5, 2013.

Credit: Reuters/Brendan McDermid

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WASHINGTON (Reuters) - The Department of Justice opposed Standard & Poor's efforts to move a spate of lawsuits charging the ratings agency with fraud to federal from state courts.

Standard & Poor's is seeking to move lawsuits by 15 U.S. states and Washington, D.C. to the federal level, hoping to limit liabilities as it defends itself against accusations of inflating credit ratings in a bid to win fees from clients.

But the Department of Justice, in a filing in the U.S. District Court for the District of Connecticut on Friday, said there was no basis in law to move the cases to the higher-level.

"Based on the nature of the causes of actions alleged by the States, and the controlling precedents, there is no federal-question jurisdiction justifying removal," it said.

S&P parent McGraw-Hill has said that the suits should be addressed all at once and that failure to do so could cause "serious confusion and risk" to financial markets.

Connecticut Attorney General George Jepsen is leading a coalition of attorneys general that brought the state cases.

These were announced on February 5, the same day that the Justice Department said it was seeking $5 billion in its own civil lawsuit against S&P. McGraw-Hill shares lost more than a quarter of their value during the week the suits were announced. They closed on Thursday at $52.08 a share.

Legal experts said earlier that S&P might struggle to move the state cases, given recent similar cases.

The lawsuits allege that S&P misled investors into believing its ratings were objective and not tainted by conflicts of interest. The ratings were mainly for complex fixed income products that imploded in the financial crisis.

Moody's Corp's Moody's Investors Service and Fimalac SA's Fitch Ratings, S&P's main rivals, were not hit with similar federal lawsuits.

(Reporting by Douwe Miedema; Editing by Leslie Gevirtz)

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Comments (3)
AZWarrior wrote:
The administration wants the states to do their dirty work because they don’t want an honest rating from S&P on federal debt (bbb+?) in retaliation. The administration is so far down the fiscal rabbit hole that no amount of bookkeeping tricks will save it. Print, print, print Ben, print like there is no tomorrow. There isn’t.

Mar 29, 2013 6:45pm EDT  --  Report as abuse
bobber1956 wrote:
Poetic justice would be for the States to take up and the burden and the S&P to STILL tank the Feds rating to that about the same as Viet Nam’s while somehow elevating the States because the DID take on the burden. Right now the worst rating of all, credibility that is, is obama and his gang of thieves.

Mar 29, 2013 7:14pm EDT  --  Report as abuse
AZreb wrote:
Oh, boy – first it is the feds saying that federal law trumps state law and now the feds want the states to bear the burden of lawsuits and court cases. What a bad joke on the American people the DOJ and other federal agencies have become.

And, yes, bobber – it would be poetic justice and we can pray for at least that justice.

Mar 30, 2013 8:48am EDT  --  Report as abuse
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