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Illinois sues S&P over ratings, alleges fraud

Jan 26 2012 Jonathan Stempel, Reuters

(Reuters) - Standard & Poor's has been sued by Illinois' attorney general, who accused it of fueling the nation's housing and financial crises by assigning inflated credit ratings to risky mortgage-backed securities. Attorney General Lisa Madigan said the McGraw-Hill Cos Inc unit, in a drive to boost market share, committed fraud and compromised its independence by issuing tainted, often "AAA" ratings to curry favor with Wall Street banks that created the securities. "S&P was making hundreds of millions of dollars a year rating these deals," Madigan said in a telephone interview. "Without the rating agencies as enablers, none of these securities would have been able to be purchased by many investors." The lawsuit accuses McGraw-Hill and S&P of violating state consumer fraud and deceptive trade practices laws. It seeks to recover profits derived from alleged inflated ratings, plus a $50,000 civil fine for each violation. David Wargin, an S&P spokesman, said:

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