Missouri to receive $21.5 million settlement
JEFFERSON CITY - Attorney General Chris Koster and Secretary of State Jason Kander announced a settlement Tuesday with McGraw Hill Financial, Inc., and its wholly owned subsidiary Standard and Poor's Financial Services, LLC (S&P).
The settlement resolves the state's claim alleging securities fraud and deceptive business practices.
S&P will pay the state of Missouri $21,535,714. This money will be transferred to the state's general revenue fund and be eligible to be used for important priorities throughout the state.
Koster and Kander filed suit in February 2013, charging S&P with four counts of securities fraud and one count of consumer fraud. Koster and Kander alleged the rating agency allowed its analysis to be influenced by its desire to earn lucrative fees from investment bank clients.
The lawsuit alleged the agency knowingly assigned inflated credit ratings to toxic assets packaged and sold by Wall Street investment banks to drum up more business for S&P.
The U.S. Department of Justice, 19 other states, and the District of Columbia all filed parallel suits.
Twenty-nine states chose not to take action against S&P and will receive nothing in the settlement.
New York and Massachusetts chose to pursue an investigation against S&P separate from the multi-state action. New York settled with the company for about $12 million. Massachusetts settled for about $7 million.
Kander said Wall Street still feels the effects of S&P.
"The consequences of S&P's irresponsible decisions can still be felt beyond Wall Street," Kander said. "This settlement holds S&P accountable for misleading Missourians and investors nationwide in the run-up to one of the greatest financial crises in our country's history. I'm proud that our work will result in over $21 million going to worthy projects throughout our state."
In addition to the financial settlement, S&P agreed to a statement of facts acknowledging conduct related to its analysis of structured finance securities.
McGraw Hill and S&P are required by the settlement to comply with Missouri's consumer protection and securities laws.
Koster said S&P was not doing its job.
"In order for the markets to function properly, investors must be able to rely on unbiased information about the potential risks they are assuming when they make investments," Koster said. "S&P admitted to issuing ratings that were not objective and independent, and now will pay Missouri more than $21 million for their unlawful conduct."
Governor Nixon thanked Koster and Kander for their work in the settlement.
"I appreciate the hard work of Attorney General Koster and Secretary of State Kander in representing Missouri, which will help provide needed funding for a number of key priorities, including programs for seniors, veterans and local law enforcement," Gov. Nixon said.
Governor Nixon announced several programs that will benefit from this S&P settlement.
• $8 million for the state's seven veterans homes
• $4.68 million for the University of Missouri School of Medicine Clinical Campus in Springfield
• $3.5 million for high-tech startups through the Missouri Technology Corporation
• $1.5 million for grants to local cyber crimes task forces to reduce Internet sex crimes and improve public safety
• $620,000 for occupational therapy and other health related degree programs at Missouri State University
• $500,000 for sheltered workshops, which provide employment for Missourians with disabilities
• $500,000 for the Missouri Department of Corrections to provide grants to local entities to work with offenders who are reintegrating into the community, including employment placement services
• $500,000 for grants to domestic violence shelters to provide services for victims of sexual assault, including counseling and emergency housing
• $500,000 for Alzheimer's Grants that provide respite and other services for people with Alzheimer's disease and their families
• $500,000 for the Missouri Division of Tourism to promote tourism across the state
• $400,000 for grants to Area Agencies on Aging to provide services to seniors, including meals
• $250,000 for the Lincoln University Land Grant Match
• $50,000 to help train teachers about how to understand and respond to students with epilepsy