Maine sues Standard & Poor over 2008 mortgage bond ratings
AUGUSTA, Maine — Maine Attorney General Janet Mills said Tuesday morning that her office has filed a lawsuit against Standard & Poor’s Financial Services LLC over the agency’s mortgage bond ratings in the run-up to the 2008 financial crisis.
The state joins the U.S. Department of Justice, which filed a suit against S&P late on Monday, and several states pursuing legal action against the company, a subsidiary of McGraw-Hill Cos. Inc.
Maine’s complaint, filed Tuesday morning in Kennebec County Superior Court, alleges that S&P violated the Maine Unfair Trade Practices Act by engaging in unfair and deceptive business practices in the rating of certain complex finance securities before the financial crisis, and “operated with an inherent conflict of interest, prioritizing profits over objective ratings,” according to a statement from Mills’ office.
Mills stressed that Maine’s complaint is separate from the suits filed by the Justice Department and other states, and that S&P will need to answer specifically to the state’s complaint under the Maine Unfair Trade Practices Act.
Good for the State administration, even if they are crazy Republicans instead of corrupt Democrats.
She said Maine may have an advantage because under its unfair trade practices law, the state doesn’t need to prove an actual monetary loss. It only needs to prove the company used deceptive business practices that affected Maine investors, she said.
Maine’s complaint claims S&P’s misconduct began as early as 2001, reaching its zenith between 2004 and 2007, and continuing into 2011.
“The mutual funds and pension funds of Maine residents, retirees and workers were adversely impacted by S&P’s misconduct,” Mills said in the statement. “The company promised independence, competence and objectivity, but what it provided were inflated ratings engineered to drive S&P’s profits at the expense of investors.”
Maine’s complaint argues that S&P violated three elements of the Maine Unfair Trade Practices Act: That it misrepresented itself in terms of its objectivity and the expertise needed to analyze complex financial tools; that it misled Maine investors, directly or indirectly, by failing to disclose its conflict of interest in rating these financial tools; and that it created unfair conditions where Maine investors relied on supposedly independent analysis when making investment decisions, which “is likely to cause substantial injury that is not reasonably avoidable by consumers and is not outweighed by countervailing benefits to consumers or competition.”
Maine’s lawsuit asks the court to require S&P to stop making misrepresentations to the public; to change the way the company does business; impose as much as $30,000 in civil penalties, one for each violation of the Maine Unfair Trade Practices Act; and the return of “any ill-gotten gains that it obtained by virtue of its unfair and deceptive acts,” according to the complaint.
Mills said the “ill-gotten gains” could equal hundreds of millions of dollars. She said there’s no plan yet as to how that money would be distributed among the states if the court rules against S&P.
Other states filing similar lawsuits are Arizona, Arkansas, California, Connecticut, Delaware, Idaho, Iowa, North Carolina, Missouri, Pennsylvania, Tennessee and Washington, as well as the District of Columbia.
Well, it's nice to have a little money, assuming Maine wins, but it's just a cost of doing business for Standard & Poor. So it would be nice to see some executives in jail.