AUGUSTA — Maine has joined several other states and the U.S. Department of Justice in a lawsuit against Standard & Poor’s claiming that the debt-rating agency engaged in unfair and deceptive business practices in rating certain financial securities that were at the heart of the nation’s financial crisis.
The complaint, filed Tuesday by Maine Attorney General Janet Mills, contends that Standard & Poor’s operated with a conflict of interest and prioritized profits over objective ratings. The lawsuit was filed in Kennebec County Superior Court.
The U.S. Department of Justice filed a similar lawsuit late Monday. The government argues that Standard & Poor’s committed fraud by giving high ratings to risky mortgage bonds that helped bring about the financial crisis.
It says the agency’s desire to make money and gain market share caused it to ignore risks posed by the investments from September 2004 to October 2007.
Maine’s lawsuit contends that Standard & Poor’s knew its analytical models could not properly assess the complex securities but it continued to rate those products anyway, often awarding them the highest and safest rating of AAA.
“S&P operated with an inherent conflict of interest because the revenues it earned came from the companies, usually banks, whose securities it rated,” Mills says in the lawsuit.
Maine’s lawsuit alleges that the misconduct began as early as 2001, increased from 2004 to 2007 and continued until 2011.
“They sold the country a bill of goods. We want to change behavior on Wall Street,” Mills said in a telephone interview.
Mills’ office seeks court orders to stop Standard & Poor’s from making misrepresentations to the public, changes in the way the debt-rating agency does business, civil penalties, and the disgorgement of ill-gotten profits, which may total hundreds of millions of dollars.
States that have filed similar lawsuits are Arizona, Arkansas, California, Connecticut, Delaware, Idaho, Iowa, North Carolina, Missouri, Pennsylvania, Tennessee and Washington, and the District of Columbia.
Standard & Poor’s, a unit of New York-based McGraw-Hill Cos., denied wrongdoing and said that any lawsuit would be without merit.
The complaints contend that investors and state regulators relied on Standard & Poor’s to fulfill its promise to maintain independence and objectivity.
“S&P went out of its way to market itself as having a high code of conduct,” Mills said.
She said Maine is not considering suing Standard & Poor’s main competitor, Moody’s Investors Service Inc.
Staff WriterJessica Hall can be contacted at 791-6316 or at: