AG Janet Mills Announces Record $21M Settlement from 19 State S&P Lawsuit
Earlier today Maine Attorney General stood on the steps of the Kennebec County Courthouse to meet with press and announce that a huge chunk of money is coming our way. Via press release:
Attorney General Janet Mills has announced the largest ever one-time settlement in Maine history. The State of Maine filed papers Wednesday with the Superior Court settling the state’s complex lawsuit against Standard & Poor’s (S&P). The lawsuit, originally filed two years ago in Kennebec Superior Court, alleged that the credit ratings giant engaged in unfair and deceptive trade practices in connection with its ratings during the time leading up to the financial crisis of 2008. The settlement was negotiated in conjunction with the federal Department of Justice and 19 states and the District of Columbia. Maine will receive $21.5 million dollars for consumer protection efforts.
The total settlement amount is $1.375 Billion. One half of the amount was paid the United States Department of Justice to settle its case. The other half was divided among the states that sued S&P. S&P is paying the Maine Office of the Attorney General $21,535,714.00, an amount commensurate with the economic harm caused by the company’s behavior and an amount which exceeds the profits from its activities, amounting to essentially a disgorgement of S&P’s ill-gotten gains. The state’s share will be directed toward consumer protection and education efforts.
Portions of her prepared statement:
“Holding S&P accountable for these practices tells Wall Street we will not tolerate acts that deceive investors and devastate our economy,” said Attorney General Mills. “As Attorney General I will continue to work to promote transparency and protect the integrity of our financial system. This settlement shows that banks did not act alone and that the Attorneys General of the states and of the United States together will pursue any entity that violates the public trust and stacks the deck against consumers and homeowners.”
Per Assistant Attorney General Linda Conti, Maine’s Consumer Protection Division Chief, the states are dividing the windfall pretty much equally, with a few exceptions receiving a slightly larger portion. More from the Justice Department:
- In its agreed statement of facts, S&P admits that its decisions on its rating models were affected by business concerns, and that, with an eye to business concerns, S&P maintained and continued to issue positive ratings on securities despite a growing awareness of quality problems with those securities. S&P acknowledges that:
- S&P promised investors at all relevant times that its ratings must be independent and objective and must not be affected by any existing or potential business relationship;
- S&P executives have admitted, despite its representations, that decisions about the testing and rollout of updates to S&P’s model for rating CDOs were made, at least in part, based on the effect that any update would have on S&P’s business relationship with issuers;
- Relevant people within S&P knew in 2007 many loans in RMBS transactions S&P were rating were delinquent and that losses were probable;
- S&P representatives continued to issue and confirm positive ratings without adjustments to reflect the negative rating actions that it expected would come.
There is ongoing similar multi-state litigation against Moody’s as well, but that is still in its preliminary stage. As such, Mills and her office were unwilling to discuss details pertaining to that case.
As for distribution of the $21M, Mills said that she intended to speak with legislative leadership and the governor’s office with recommendations for usage of the funds.