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Ohio attorney general sues national ratings agencies

COLUMBUS, Ohio (11/25/09)--Ohio Attorney General Richard Cordray has filed a lawsuit against three national investment credit ratings agencies--Standard & Poor's, Moody's and Fitch--saying their ratings were false and misleading.

The suit was filed Friday in the U.S. District Court for the Southern District of Ohio on behalf of five Ohio public employee retirement and pension funds. It charges the agencies wreaked havoc on U.S. financial markets by providing unjustified and inflated ratings of mortgage-backed securities in exchange for lucrative fees from securities issuers, said Cordray's press release.

The agencies provide investments ratings for entities such as corporate credit unions and CUNA Mutual Group.

In Ohio, "the rating agencies assured our employee pension funds that many of these mortgage-backed securities had the highest credit ratings and the lowest risk," said Cordray, adding the companies "sold their professional objectivity and integrity to the highest bidder."

At issue is the agencies' highest investment grade rating--"AAA"--which the suit alleges were given to securities that cost the Ohio funds more than $457 million.

The lawsuit is brought on behalf of the Ohio Public Employees Retirement System, the State Teachers Retirement System of Ohio, the Ohio Police and Fire Pension Fund, the School Employees Retirement System of Ohio and the Ohio Public Employees Deferred Compensation Program.

The suit is Cordray's eight lawsuit aimed at holding Wall Street entities accountable. The suits have recovered more than $8 billion to date. For more detail, use the link.

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