(AXcess News) Washington – The Justice Department filed suit in Los Angeles’ federal court Monday, charging the rating agency with a host of fraud charges relating to its ratings on mortgage backed securities, claiming S&P knowingly understated the credit risks.
In McGraw-Hill’s defense, much of the case against its S&P business unit may lay in the hands of whistle blowers that the Justice Department would need in order to proof its case. Never the less, the U.S. Government felt it had enough evidence to bring the lawsuit that many on Wall Street have expected.
Some believe the lawsuit is in response to the downgrade of the United States by S&P, yet the Justice Department believes the real issue is whether or not the rating agency deliberately looked away from the fact that there was more risk than S&P wanted to report due to the enormous revenue mortgage backed securities ratings generated.
S&P said in a statement yesterday that the lawsuit, “was without fact or legal merit.”
None the less, McGraw-Hill’s shares plummeted more than in the past 25 years following the news.