Illinois will receive a $52.5 million share of a multi-state settlement with Standard & Poor's over allegations that the credit ratings agency knowingly inflated ratings to risky mortgage investments in the years that led up to the 2008 economic crisis, Attorney General Lisa Madigan announced Tuesday.
Illinois Takes $52 Million Settlement Share from S&P
Published Feb 3, 2015 at 10:14 AM | Updated at 12:17 PM CST on Feb 3, 2015
She was among nearly two dozen attorneys general who, along with the U.S. Department of Justice, worked on the $1.375 billion settlement with S&P. Illinois' share will go toward the state's underfunded pension systems, a Madigan spokeswoman said.
The settlement with McGraw Hill Financial subsidiary Standard & Poor's Financial Services LLC deals with ratings issued from 2004 through 2007. The settlement also resolves lawsuits filed by the attorneys general of 19 states and the District of Columbia.
According to the settlement, S&P misrepresented its process used to assign credit ratings, assigning its highest ratings to risky mortgage-backed securities. The maneuvers were part of a plan aimed at keeping clients and increasing market share.
In its statement of facts, the agency doesn't admit or deny wrongdoing, however it does detail its conduct.
"Standard & Poor's deliberately exploited its trusted reputation as an independent analyst to maximize profits and gain market share, and in the process, S&P became a key enabler of the economic meltdown," Madigan said in a statement. "Were it not for S&P abandoning its core principles, these securities, made up of unsustainable mortgages destined for default, could never and would never have been purchased by many investors."
The states included in the settlement are Arizona, California, Delaware, Indiana and Maine.
Madigan first filed a lawsuit against S&P in 2012 for misconduct contributing to the 2008 collapse. That lawsuit alleged that the ratings agency gave out high ratings to risky investments to increase profits, which led investors to buy securities that were riskier than their ratings indicated.