S&P Loses Bid to Throw Out California’s False-Claims Lawsuit
McGraw Hill Financial Inc. (MHFI) and its Standard & Poor’s unit lost a bid to throw out a false claims lawsuit brought by California to recover losses to state pension funds that relied on the company’s credit ratings.
California Superior Court Judge Curtis Karnow in San Francisco today overruled the companies’ demurrer to the lawsuit.
McGraw Hill and S&P had argued that California’s lawsuit didn’t meet the requirements of a false-claims case. S&P wasn’t the seller and didn’t present any claims for payment, and the case was filed too late, the companies said.
“I can infer from the complaint that S&P ‘caused’ PERS and STRS to purchase the securities,” the judge said in his order, referring to two state pension funds. “This is good enough for present purposes.
The California Public Employees’ Retirement System and the California State Teachers Retirement System lost about $1 billion after the housing market collapsed in 2007 and the securities backed by residential mortgages were downgraded to junk status, California Attorney General Kamala Harris said after her office filed the complaint on Feb. 5.
Catherine Mathis, a spokeswoman for S&P, didn’t immediately respond to an e-mail after regular business hours seeking comment on the ruling.
The case is the People v. McGraw-Hill Cos., CGC-13-528491, San Francisco County Superior Court.
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