California opposed a bid by McGraw Hill Financial Inc.’s Standard & Poor’s unit to throw out the false-claims lawsuit that accuses the company of providing inflated ratings for securities bought by state pension funds.
California Attorney General Kamala Harris, in a filing today in San Francisco state court, said S&P misconstrued the law in trying to get the case dismissed. Harris also said S&P was incorrect in arguing that the losses of the California Public Employees’ Retirement System and the California State Teachers Retirement System weren’t state funds.
“S&P cannot escape liability simply because it did not submit the false claims itself,” the attorney general said in the filing. “Liability extends to anyone who causes false claims to be presented and anyone who causes the use of false records or statements to get false claims approved.”
California was among more than a dozen states that sued S&P in the wake of a U.S. Justice Department lawsuit that accused the New York-based ratings company of lying to investors by letting its desire for more business influence how it graded residential mortgage-backed securities and collateralized-debt obligations.
The two California public pension funds lost more than $1 billion when the U.S. housing market collapsed in 2007 and the value of the securities for which S&P had provided its highest credit ratings evaporated, according to the attorney general’s lawsuit.
The case is the People v. McGraw-Hill Cos., CGC-13-528491, California Superior Court, San Francisco County (San Francisco).