The Credit-rating agency Standard & Poor’s will pay $77 million to settle with U.S. and state regulators over “fraudulent misconduct.” The SEC and state attorneys general alleged that the company publicly misrepresented the methodology it was using to rate six different CMBS products in 2011. In an effort to regain the market share it lost over its errors, the SEC said the company then “published a false and misleading article” claiming its new credit levels could withstand “Great Depression-era” stress levels.
Standard & Poor’s will also be barred for one year from rating commercial mortgage-backed securities, in an unprecedented settlement with U.S. and state regulators who accused the U.S. credit rating agency of misleading investors.
The SEC said S&P will pay $58 million to settle three matters with the agency, plus $19 million to settle parallel cases with the attorneys general of New York and Massachusetts. New York Attorney General Eric Schneiderman said Wednesday in a statement that S&P’s 2011 conduct amounted to “lying to investors” so it could bolster its profits. In addition to charging the company on Wednesday, the SEC also charged former S&P executive Barbara Duka, in a related case. Duka is planning to contest the charges in an SEC administrative court. Her attorney, Guy Petrillo, said in a statement that his client “did not act wrongfully” and performed her duties with the “utmost good faith.”
Jeffrey Newman is a whistleblower lawyer whose firm represents whistleblowers in, healthcare fraud cases under the False Claims Act (FCA) and also under the Securities and Exchange, FINCEN and CFTC whistleblower programs. He can be reached at Jeff@JeffNewmanLaw.com or at 617-823-3217
