S&P’s Outrageous, Clever Fraud Defense

Standard & Poor filed to a motion to dismiss the U.S. Department of Justice’s fraud suit, which accuses the rating agency of forging ratings on investment options, resulting in the 2008 financial crisis.  The Obama administration filed the multibillion-dollar civil suit in February, and S&P has hired two of the best known attorneys in the U.S. for their defense.  The motion filed by S&P notes that other agencies like Moody’s and Fitch gave similar, often identical, ratings, and yet were not including in the lawsuit.  In response, the Justice Department has pointed out that S&P is the self-proclaimed “leading provider of independent opinions and analysis on the debt and equity markets” of the world.  However, S&P has responded by claiming that the statement is simply puffery.

This lawsuit should ultimately assign responsibility to the parties involved in the 2008 financial crisis.  Many blame the rating agencies for misleading investors, and S&P is the one that is front and center.  This case should create legal precedent for future cases, making it an important one for future government regulation.

Written by: Constantine Kostikas

Source: Businessweek.com


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