LOS ANGELES (Legal Newsline) — California’s acting attorney general, Kathleen A. Kenealy, along with the U.S. Department of Justice and the attorneys general from 20 other states and the District of Columbia, announced Jan. 13 that Moody’s Corporation (Moody’s) will pay $863.8 million after allegations related to the company’s misconduct in inflating ratings of residential mortgage-backed securities.
Moody’s purportedly misrepresented to the public, including the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS), that the ratings it used for finance securities were based solely on objective analysis and not on Moody’s economic interests.
Clients of the company used securities ratings to decide on securities investment options. The alleged conduct of Moody’s helped lead to the 2008 financial crisis.
“Moody’s misled their clients about the objectivity of its ratings and their misconduct caused significant losses to Californian’s pension funds,” Kenealy said. “I want to thank our California Department of Justice attorneys for their great work to hold Moody’s accountable.”
Of the more than $863 million penalty, $150 million will go to the state of California. These funds will help recover losses sustained by CalPERS and the CalSTRS.