Ill. attorney general sues rating agency over housing bubble
Illinois Attorney General Lisa Madigan has filed suit against ratings agency Standard and Poor's for fraudulently assigning high ratings to mortgage-backed investments despite their risk.
The suit filed today in Cook County - the state's largest - argues that instead of independently evaluating mortgage-backed securities, S&P gave them higher ratings than warranted to benefit investment bank clients and the agency's bottom line.
"Publicly, S&P took every opportunity to proclaim their analyses and ratings as independent, objective and free from its desire for revenue," Madigan said in a statement. "Yet privately, S&P abandoned its principles and used every trick possible to give deals high ratings in order to retain clients and generate revenue. The mortgage-backed securities that helped our market soar - and ultimately crash - could not have been purchased by most investors without S&P's seal of approval."
The suit sites internal e-mails and conversations from S&P employees. Madigan's statement lists one electronic conversation from 2007, in which a company employee stated that an investment could be "structured by cows" and S&P would rate it.
The suit seeks to force S&P to stop the allegedly deceptive practices and to turn over any "revenues, profits and gains achieved in whole or in part through the unfair acts or practices complained of herein." Madigan is also seeking a $50,000 civil penalty.