Standard & Poor’s May Face $5 Billion Lawsuit
The U.S. Department of Justice has a possible $5 billion lawsuit against the powerful ratings agency Standard and Poor’s.
The U.S. suit is pending in California court and asks for an accounting of S&P evaluations made on mortgage-backed securities in the lead-up to the 2008 financial crisis.
Denying wrongdoing, S&P says it has not committed fraud or provided anything other than very inaccurate decisions and forecasts regarding grades.
If the federal government can prove its alleged intentional deception to shape its fraud case, billions of dollars in damages are on the line. The key will be whether whether government attorneys can get current and former S&P analysts to say in scheduled depositions that they know they were approving securities that were not in fact AAA rated, yet were rated as such by S&P.
As many as nine current and former employees of McGraw Hill Financial Inc.’s Standard & Poor’s unit may be questioned by U.S. Justice Department along with six current collateralized-debt obligation analysts who graded the products.
The Justice Department last year accused S&P of lying about its ratings being free of conflicts of interest while S&P is looking to prove that the lawsuit is political in response to S&P downgrading U.S. debt and being the only body to do so.
JP Morgan Chase Pays $1.45 Million Harassment Settlement
JP Morgan Chase wasn’t available to comment about its paying a $1.45 million settlement to 16 female employees sexually harassed by co-workers.
The alleged actions occurred at offices located outside of Columbus, Ohio, where the EEOC filed the lawsuit after trying to settle with JP Morgan Chase out of court.
The lawsuit alleged female mortgage bankers “faced sexually charged behavior and comments from the supervisory staff and participating mortgage bankers, which resulted in a sexist and uncivil atmosphere.”
The lawsuit claims those female employees who “didn’t embrace and participate in circumstances became ostracized and suffered economic consequences by being deprived of lucrative sales calls, being deprived of training opportunities, and being denied other benefits of employment.”
The J.P. Morgan Chase settlement follows Bank of America Corp. in September which agreed to pay $39 million to settle a discrimination lawsuit brought on behalf of female financial advisers and licensed trainees at Merrill Lynch.
Goldman Sachs Faces $1 Billion Suit Over Collateralized Debt Obligation
An appellate court in Manhattan upheld a 2012 ruling denying Goldman Sachs’ motion to dismiss fraud claims of negligent misrepresentation, unjust enrichment and rescission.
Australian fund Basis Capital’s Basis Yield Alpha seeks more than $67 million it said it lost in the deal and $1 billion in punitive damages from Goldman Sachs. Goldman Sachs is accused of making false and misleading statements on securities known as Timberwolf and Point Pleasant.
Basis Capital said in the lawsuit relates to Point Pleasant, a collateralized debt obligation based on sub-prime residential home mortgages, and two credit default swaps that referenced securities from a similar product known as Timberwolf.
The Securities and Exchange Commission, last year received a Goldman Sachs $550 million settlement to resolve legal claims over its marketing of collateralized debt obligations which it said was confusing and misleading.