NEW YORK - The legal troubles of the country’s largest credit rating agencies, which already face a slew of private lawsuits, deepened yesterday when the attorney general of Ohio sued Moody’s, Standard & Poor’s, and Fitch, alleging they had cost state retirement funds some $457 million by approving high-risk Wall Street securities that went bust in the financial collapse. The case could test whether the agencies’ ratings are constitutionally protected as a form of free speech.
The lawsuit asserts that Moody’s, S&P, and Fitch were in league with the banks and other issuers, helping to design an assortment of exotic financial instruments that led to a disastrous bubble in the housing market.
“We believe that the credit rating agencies, in exchange for fees, departed from their objective, neutral role as arbiters,’’ the attorney general, Richard Cordray, said at a news conference. “At minimum, they were aiding and abetting misconduct by issuers.’’
Steven Weiss, a spokesman for McGraw-Hill, which owns S&P, said the lawsuit had no merit and the company would vigorously defend itself. Michael Adler, a spokesman for Moody’s, also disputed the claims. A Fitch spokesman said the company would not comment because it had not seen the lawsuit.
The litigation adds to a growing stack of lawsuits against the three largest credit rating agencies, which command an 85 percent share of the market. More litigation is likely. As part of a broader financial reform, Congress is considering provisions that make it easier for plaintiffs to sue rating agencies.
