Tags: S&P Said to Settle Calpers Ratings Lawsuit for 125 Million

S&P Said to Settle Calpers Ratings Lawsuit for $125 Million

Tuesday, 03 February 2015 07:00 AM

(Updates with agreement terms in fourth paragraph.)

(Bloomberg) -- Standard & Poor’s reached a $125 million lawsuit settlement with the largest U.S. state pension fund over inflated ratings on residential-mortgage bond deals, two people familiar with the matter said.

S&P will pay the California Public Employees Retirement System, or Calpers, to resolve claims over grades on subprime mortgages during the run-up to the 2008 financial crisis, according to the people, who asked not to be identified because the matter isn’t public. In multiple accords including the Calpers deal that will be announced Tuesday, S&P and parent McGraw Hill Financial Inc. will pay $1.5 billion in total to resolve similar allegations from the U.S. Justice Department and more than a dozen states, the people said.

California will receive $210 million as part of S&P’s settlement with the Justice Department and attorneys general of 19 states and the District of Columbia, one of the people said. That sum is separate from S&P’s $125 million agreement with Calpers, the person said.

The agreement will require S&P to acknowledge in a statement that mortgage-backed securities it was rating leading up to the financial crisis were becoming increasingly risky, the person said. S&P will acknowledge that it elected not to downgrade those securities “at least partly due to business considerations,” the person said.

Negotiation Delay

The agreement with the Justice Department and the attorneys general was almost completed in the middle of January, the person said, ahead of S&P’s negotiations with Calpers. Talks between S&P and the attorneys general faltered over “hotly contested” terms that California Attorney General Kamala Harris felt might compromise Calpers’ case, according to the person. All the suits were resolved together after Calpers independently decided to join, the person said.

Brad Pacheco, a Calpers spokesman, declined to comment on the settlement. Catherine Mathis, a spokeswoman for S&P, declined to comment on it.

The Wall Street Journal reported the Calpers settlement earlier.

The case is Calpers v. Moody’s, A134912, California Court of Appeals, First District (San Francisco). The Justice Department case is U.S. v. McGraw-Hill Cos., 13-cv-00779, U.S. District Court, Central District of California (Santa Ana).

--With assistance from Karen Gullo in federal court in San Francisco.

To contact the reporters on this story: Matt Robinson in New York at mrobinson55@bloomberg.net; Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net; Shannon D. Harrington at sharrington6@bloomberg.net Peter Blumberg

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S&P Said to Settle Calpers Ratings Lawsuit for $125 Million
S&P Said to Settle Calpers Ratings Lawsuit for 125 Million
Tuesday, 03 February 2015 07:00 AM
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