North Carolina will Receive $21.5 million in Settlement with Standard and Poor's
North Carolina will receive $21.5 million from a $1.4 billion settlement between Standard and Poor's, the federal government and 19 states.
The settlement with the ratings company is in response to a 2013 lawsuit filed by the North Carolina Attorney General's Office seeking to hold Standard and Poor's (S&P) accountable for misrepresenting the objectivity of its ratings for securities backed by subprime mortgages.
Ratings are critical for investors, governments and other borrowers because it helps them make financial decisions. Market participants and investors relied on S&P to provide independent and objective credit ratings for financial products such as structured finance securities. The complaints alleged that S&P's analyses were influenced by fees paid by its investment bank clients, leading the company to wrongly inflate credit ratings for high-risk assets packaged and sold by Wall Street banks.
S&P's alleged misconduct began as early as 2001, became particularly acute between 2004 and 2007, and continued until as recently as 2011.
North Carolina's lawsuit was pending in the NC Business Court. With Tuesday's agreement, North Carolina Attorney General's Office lawyers will file the settlement to resolve the case.
More than $2.1 million will benefit North Carolina schools through the Civil Penalty and Forfeiture Fund. Cooper said he will recommend that the funds also be used to save the NC Teaching Fellows Program and retain scientists at the NC State Crime Lab, which is losing expert analysts to higher paid jobs elsewhere.
In addition to the financial settlement announced today, S&P has agreed to acknowledge its conduct related to the analysis of structured finance securities and to comply with applicable state laws. For a period of five years, S&P also agreed to cooperate with any state's request for information related to a possible violation of state law.
States participating along with North Carolina include Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Idaho, Illinois, Indiana, Iowa, Maine, Mississippi, Missouri, New Jersey, Pennsylvania, South Carolina, Tennessee and Washington as well as the District of Columbia.
In 2012, the North Carolina Attorney General's Office brought in more than $300 million in the national mortgage settlement that went to more prosecutors, financial crimes investigators, lending counselors and refunds to homeowners. Those funds also established the Financial Fraud Unit of the North Carolina Attorney General's Office, which pursued the S&P case.