Moody’s Announce a Pact with Calpers Over a 2009 Ratings Lawsuit for $130 Million
On Wednesday, Moody's announced a pact with California Public Employee Retirement System in which the investor service will pay $130 million to settle claims for supposedly inflated ratings during the financial crisis era on residential- mortgage bond deals.
The prominent lawsuit which alleges crisis-era misconduct will be a record settlement for Moody's Investor's Service.
In 2009, in a lawsuit the California Public Employees' Retirement System alleged that Moody's along with two other ratings firms had made "negligent misrepresentations" while awarding optimistic grades to residential mortgage bonds which later plunked. While purchasing the bonds, the largest public pension fund in the U. S, commonly known as Calpers; relied on the ratings of these firms.
Calpers also reached a $125 million settlement with the world's biggest rating firm, Standard & Poor's Ratings Services last year.
A Spokesperson from Moody's, Michael N. Adler, said in an emailed statement on Wednesday, "The resolution of this long-running litigation, which concerns three structured investment vehicles that Moody's rated in 1995, 2002 and 2005, is in the best interest of our company and its shareholders."
In October, Moody's said, since 2007 approximately sixty cases have been filed in relation to bond ratings and among them less than twenty percent still is unsettled.