Published March 29, 2013
WASHINGTON – 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)