McGraw issues subpoena to financial group

John O'Brien Aug. 11, 2009, 3:51pm


CHARLESTON, W.Va. (Legal Newsline) - West Virginia Attorney General Darrell McGraw has subpoenaed Ambac Financial Group, Inc., becoming the third state attorney general to investigate the company over possible antitrust violations.

California's Jerry Brown and Connecticut's Richard Blumenthal have already probed the company, which provides financial services to public and private entities. The company revealed McGraw's subpoena Monday in a filing with the Securities and Exchange Commission.

Reuters first reported the story. McGraw issued his subpoena June 17.

McGraw is investigating "possible antitrust violations in connection with the use of swaps, guaranteed investment contracts and other derivatives and investment vehicles related to municipal bonds issued by West Virginia governmental entities," the filing said.

McGraw is seeking any documents related to the financial moves, as well as investment vehicles sold by Ambac to a state governmental entity or any bids it submitted that were not the winning bids.

Ambac, the second-largest bond insurer, has fallen on hard times, posting a $2.4 billion loss for the second quarter of this fiscal year - an $8.33 loss per share.

The State of Massachusetts, through its Securities Division, subpoenaed the company for information relating to bonds it had insured.

Blumenthal is seeking information on municipal bond rating practices employed by credit rating agencies. The company says the "focus of the investigation appears to be the disparity in ratings with respect to municipal and corporate credits, respectively, insofar as Ambac is concerned.

Brown's subpoena, issued Dec. 15, is also seeking information on credit rating agencies in the rating of municipal bonds issued by the State and related issuers.

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