Connecticut Attorney General's Office
Press Release
Attorney General Wins First-Step Battle To Hold Credit Rating Agency Accountable For Deceptive Ratings That Cost Taxpayers Millions
August 20, 2010
Attorney General Richard Blumenthal announced today the Superior Court has rejected Standard & Poor’s (S&P) motion to dismiss his case against the credit rating agency for allegedly giving artificially low credit ratings to municipalities, costing taxpayers millions of dollars in unnecessary bond insurance and higher interest rates.
Blumenthal’s case against S&P -- as well as companion cases against Moody’s Corporation and Fitch, Inc. -- will all now advance in state court.
“We are seeking to hold Wall Street accountable to Main Street -- for millions of dollars unfairly imposed on Connecticut taxpayers,” Blumenthal said. “While the credit rating agencies will no doubt continue fighting to avoid accountability for their misconduct, this early victory requires the companies to answer our claims in a Connecticut court. The court has soundly rejected S&P’s efforts to force us to litigate our cases in New York and, in doing so, has clearly affirmed the state’s right to have its claims against S&P evaluated here in Connecticut.
“All three credit rating agencies systematically and intentionally gave lower credit ratings to bonds issued by states, municipalities and other public entities as compared to corporate and other forms of debt with similar or even worse rates of default. Connecticut's cities and school districts have been forced to spend millions of dollars, unconscionably and unnecessarily, on bond insurance premiums and higher interest rates as a result of deceptive and deflated credit ratings.
“Our fight will continue, as taxpayers deserve, to reform Wall Street practices that have damaged our economy. My lawsuits have already produced results -- as both Moody’s and Fitch earlier this year began raising the credit ratings of Connecticut cities and towns. These higher bond ratings will save Connecticut taxpayers millions of dollars in local taxes over the coming years.”
In separate lawsuits filed earlier this year, Blumenthal also alleges that Moody’s and S&P knowingly assigned tainted credit ratings to risky investments backed by sub-prime loans, enabling the worst economic downturn since The Great Depression. Blumenthal is continuing to fight efforts by the companies to defeat those cases.