HARTFORD, Conn. (Legal Newsline) -- In a federal court filing earlier this week, Standard & Poor's Rating Services accused the U.S. Department of Justice of hiding its collaboration with a group of state attorneys general in suing the credit ratings agency over its alleged fraud.
In an April 2 filing in the U.S. District Court for the District of Connecticut, Standard & Poor's responded to the DOJ's statement of interest supporting motions to remand filed by the 17 states.
The ratings agency, in its eight-page filing, said there is "nothing inherently wrong" with the DOJ's cooperation with the states; however, "it is not too much to ask" that the department "fully and candidly advise" any court in which it files the "equivalent" of an amicus brief supporting a state "of that relationship."
Click here to read Standard & Poor's full response.
The credit ratings agency is fighting to consolidate the state lawsuits in federal court. The DOJ and the states want their suits to remain under state jurisdiction.
In February, the DOJ and a group of 13 states and the District of Columbia filed their suit in the U.S. District Court for the Central District of California. They are accusing the ratings agency, a subsidiary of The McGraw-Hill Companies Inc., of fraud.
The 13 states include Arizona, Arkansas, California, Colorado, Delaware, Idaho, Iowa, North Carolina, Maine, Missouri, Pennsylvania, Tennessee and Washington.
The DOJ and the states allege that the ratings agency's misconduct involved structured finance securities backed by subprime mortgages that were at the heart of the nation's financial crisis.
In their suit, the department and the states contend that Standard & Poor's inflated mortgage investment ratings and set them up for a crash.
In particular, they claim that the agency -- from September 2004 through October 2007 -- "knowingly and with the intent to defraud, devised, participated in and executed a scheme to defraud investors" in certain mortgage-related securities.
They also claim Standard & Poor's falsely represented that its ratings were "objective, independent, uninfluenced by any conflicts of interest."
Connecticut, Illinois and Mississippi have filed their own, similar lawsuits against the ratings agency.
Connecticut sued the credit ratings agency and its parent in March 2010. Its current attorney general, George Jepsen, is now reportedly leading the multistate coalition.
Illinois also filed its own suit against Standard & Poor's last year.
Mississippi Attorney General Jim Hood has had his own consumer protection lawsuit pending against Standard & Poor's, as well as its chief competitor, Moody's Investors Service Inc., since 2011.
Standard & Poor's, in this week's filing, argues that the DOJ -- "purely for strategic litigation-related reasons" -- seeks to impose on the ratings agency the "risks" of litigating the same claims in 17 different courtrooms and, if any succeed, to "deal with a patchwork of potentially overlapping and inconsistent injunctions."
"This tactically driven position would impose a significant cost not only on S&P but on the justice system as a whole," the agency wrote.
"All that S&P seeks at this time is for the relevant judicial authorities to coordinate their own efforts to ensure that these actions be treated in a rational and coordinated manner in one forum where all claims may be entertained in an efficient, uniform and consistent fashion."
From Legal Newsline: Reach Jessica Karmasek by email at firstname.lastname@example.org.