Connecticut Attorney General Richard Blumenthal today filed a state lawsuit against ratings agencies Moody's and Standard & Poor's, alleging that the two firms knowingly assigned “tainted credit ratings” to risky investments backed by subprime loans to earn “lucrative fees” from issuers of structured finance securities.
In a news release, Mr. Blumenthal said “these credit rating agencies gave the best ratings money could buy,” and violated the Connecticut Unfair Trade Practices Act.
The lawsuit seeks an order stopping the two firms “from deceiving consumers, as well as civil penalties and disgorgement of ill-gotten profits,” according to the news release.
An e-mailed statement forwarded by Moody's spokesman Michael N. Adler said, “The state attorney general's suit is without merit, and we are confident that we will prevail once we have an opportunity to present the facts of the case.”
Steve Weiss, a spokesman for S&P parent company McGraw-Hill Cos., said, “We believe the claim has no legal or factual merit, and we intend to vigorously defend ourselves against it.”
Separately, Ohio Attorney General Richard Cordray in a statement today said he was “encouraged” by the Connecticut lawsuit. Mr. Cordray filed a lawsuit in November in U.S. District Court for the Southern District of Ohio against the rating agencies on behalf of Ohio's five statewide pension plans, alleging the agencies provided “unjustified and inflated ratings of mortgage-backed securities in exchange for lucrative fees from securities issuers.”