McGraw Hill Cos.’ Standard & Poor’s unit must face Illinois Attorney General Lisa Madigan’s lawsuit accusing the company of a “fraudulent role’” in assigning improperly high ratings to mortgage-backed securities.
Cook County Circuit Court Judge Mary Anne Mason yesterday denied McGraw Hill and S&P’s request to dismiss the case. The judge rejected all of the company’s arguments that Illinois had no legal basis for its lawsuit, including the argument that its rating opinions are protected by the U.S. Constitution’s guarantee of freedom of expression.
“While even purely ‘commercial’ speech is entitled to a limited degree of First Amendment protection, courts have long held that neither the federal nor state constitutions protects false, misleading or deceptive commercial speech,” Mason said in her order.
Madigan, in her complaint filed in January, said the ratings service put profit first, while purporting to provide independent, objective analyses. In one 2007 online exchange among S&P workers, an employee said an investment “could be structured by cows and we would rate it,” according to a statement Madigan issued when the complaint was filed.
“Notwithstanding this recent ruling, we continue to believe the case is without merit and will continue to vigorously defend ourselves,” Ed Sweeney, a spokesman for S&P in New York, said in an e-mail.
The case is Illinois v. The McGraw-Hill Cos. and Standard & Poor’s, 12CH02535, Circuit Court of Cook County, Illinois, County Department, Chancery Division (Chicago).