AUGUSTA — Maine is slated to get $21.5 million from Standard & Poor’s to settle an unfair trade practices lawsuit the state filed against the credit-rating agency.
The settlement was negotiated by the federal Department of Justice and a coalition of 19 states, including Maine, as well as the District of Columbia.
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Maine’s share of the multi-state settlement was announced Wednesday by Attorney General Janet Mills at a press conference on the front portico of the Kennebec County Courthouse. The money, she said, will go to consumer protection and education efforts and assistance with foreclosure relief and remediating effects of the 2008 recession. She said the money is expected to arrive this spring.
The Maine lawsuit, filed in Kennebec County in February 2013 against McGraw Hill Cos. Inc. and Standard & Poor’s, alleged that actions by the credit rating agency were not objective and were influenced by the firm’s market share and revenue considerations and contributed to the 2008 financial crisis. Overall, the credit rating agency’s actions allegedly caused huge losses for pension funds and retirement and other investment accounts.
The company is paying $687.5 million to the federal government, and another $687.5 million will be divided among the 19 states and District of Columbia. The states of Washington and Delaware, for instance, are each receiving $21.5 million as well, according to news releases from their respective attorney general’s offices.
Mills said that last year new requirements were adopted by the U.S. Securities and Exchange Commission that deal with conflicts of interest by credit rating agencies.
Mills said the settlement — which gives the state the largest single settlement in its history — ends “a very complex and lengthy lawsuit.”
She said the firm’s actions to inflate their ratings for various products between 2006 and 2008 “contributed greatly to the demise of the housing market in Maine and elsewhere across the country. It contributed to the loss of jobs here in Maine and the loss of houses and the foreclosure crisis both here in Maine and elsewhere, the remnants of which we are still dealing with.” She said the firm inflated ratings for residential mortgage-backed securities and credit default options.
“They did it … because they were getting fees, essentially kickbacks from the investment banks that owned those products,” she said.
The settlement is an estimate of the fees the firm received for relying on those ratings.
She said the settlement holds the firm and Wall Street accountable and puts them on notice.
“We will not tolerate acts that deceive investors and that devastate our economy,” Mills said outside the courthouse.
She said the money will support existing programs and could help those in the foreclosure process as outlined in the settlement agreement.
“Our intent is to beef up efforts of foreclosure housing counselors,” she said.
Mills said the federal portion of the settlement will help provide some homeowner relief.
Mills also said she could not comment on whether the state was taking action against any other credit rating agency.
“We felt all along Standard & Poor’s was the major player here,” Mills said.
Mills credited Assistant Attorney General Linda Conti, of the Consumer Protection Division, for her work on the settlement.
“I’m glad it’s over,” Conti said.
Betty Adams — 621-5631
Twitter: @betadams
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