Richard Blumenthal (D)
HARTFORD, Conn. (Legal Newsline)-Connecticut Attorney General Richard Blumenthal on Wednesday sued the nation's three major credit-rating agencies for allegedly engaging in deceptive and unfair practices.
Targets of the Democratic attorney general are: Moody's Investors Service, Standard & Poor's and Fitch Ratings.
Blumenthal said the companies' "deceptive and unfair practices" have cost taxpayers millions of dollars in interest and bond insurance costs.
"We are holding the credit-rating agencies accountable for a secret Wall Street tax on Main Street," Blumenthal said.
The lawsuit was filed in Hartford Superior Court, the attorney general's office said.
In January, Blumenthal's office issued subpoenas to the credit rating agencies and bond insurers as part of an investigation into illegal practices surrounding the issuance of municipal bonds.
The investigation found that conflicts of interest among the various players could have resulted in "unnecessary and excessive charges" to taxpayers.
Because the credit-rating firms that rate municipal bonds "knowingly and systematically" gave the securities lower grades than comparable corporate and structured debt, costs were increased for state and local governments, including school districts and sewer and water districts, Blumenthal said.
"This rating charade created a Wall Street shell game constructed by the ratings agencies for the benefit of the bond insurers," he said.
In a statement, Fitch Managing Director David Weinfurter his firm would fight the lawsuit.
"Fitch rates Connecticut and all states based on our forward-looking opinion as to their financial capacity to pay their debts as they come due -- not based solely on historical rates of default," Weinfurter said.
Moody's Chief Executive Officer Raymond McDaniel on Wednesday called the lawsuit merit-less.
"The suit implies that the measuring system is wrong," McDaniel said in a conference call. "That's like saying it's wrong to measure distance in centimeters and right to measure it in inches."
From Legal Newsline: Reach reporter Chris Rizo at firstname.lastname@example.org.