The U.S. government is pursuing Standard & Poor’s (S&P), the international ratings agency, for purported improprieties during the financial crisis that may have resulted in billions of dollars in losses. At the heart of the case, according to Bloomberg News, are a series of emails between S&P executives that suggest a high level of collusion and data alteration that goes as far back as 2004. Some of the contents, including the alleged motives being contested in the lawsuit, suggest that one of the top credit authorities in the nation may have been systematically adjusting its ratings on a wide variety of financial instruments.
The U.S. Justice Department, in its filing, is fighting for up to $5 billion in damages for the fallout stemming from the housing collapse that contributed to the 2007-2008 financial crisis. U.S. Attorney General Eric Holder, speaking at a press conference on February 6, said that “this alleged conduct is egregious.”
One of the emails, from an unnamed financial analyst at S&P, allegedly shows an active effort to lower accounting standards after the loss of a lucrative contract in 2004.
“This is so significant that it could have an impact on future deals,” the S&P employee wrote. “There’s no way we can get back on this one, but we need to address this now in preparation for future deals.”
S&P has categorically denied the charges and stated in a press statement that it would seek vindication in court. It called the communications as having been “taken out of context” and “contradicted by other evidence.”
Investors in the United States and abroad should follow this story closely, as the lawsuit could have a significant impact on markets. Following news of the litigation, McGraw-Hill Cos., S&P’s parent company, shed nearly 13.8 percent of its market value on February 5, the day it was announced. For more updates on this topic, as well as information on how you can pursue methods of wealth preservation in this troubled economy, stay with the GreatWealthStrategies.com blog.