Iowa is one of several states to file consumer lawsuits today against Standard & Poor’s Ratings Services. Attorney General Tom Miller alleges the financial ratings company misrepresented its investment analysis services leading up to the economic crash in 2007 and 2008.
“In numerous instances — including their code of conduct — Standard and Poor’s clearly and specifically represented that the ratings that they would make would be independent, impartial and not be affected by business considerations in an way, shape or form,” Miller says.
“And we accuse them in our lawsuit of a misrepresentation under the Iowa Consumer Fraud Act concerning that reputation.” Miller alleges the company began giving false higher ratings to investment banks beginning in 2001 in an attempt to make more profit.
“They were concerned that if they had a more rigorous rating of the bonds, they would lose the business of the issuers to other rating agencies,” Miller says. The lawsuit asks for several things.
“We seek an injunction to stop this from ever happening again. We’re also going to pursue the idea, the objective of a monitor, also to ensure that it never happens again,” Miller explains. “We will seek civil penalties, significant civil penalties for the alleged violations. And also, we will seek disgorgement of their profits from these bonds and securities that they rated the fees for them.”
Miller says Iowans could have been impacted by S&P’s actions in a variety of ways. “Potentially in their pension plans and 4-0-1-K’s, there could have been an affect. At the larger level — at the macro level — we alleged that if Standard and Poor’s had not given the Triple-A rating to the large group that they did, many of the significant consequences would not have taken place,” Miller says.
Iowa is part of a group of 15 states that are filing lawsuits against the ratings firm. Miller says they are still trying to figure the amount of profits Standard & Poor’s allegedly made from the false ratings.