Missouri on Tuesday joined the legal action against Standard & Poor’s Rating Services, which has been charged with misleading investors about the quality of mortgage-backed investments in the runup to the financial crisis.
Missouri is among 15 states that along with the District of Columbia joined federal authorities in alleging fraudulent credit rating procedures against S&P. Missouri’s complaint was filed in Jackson County Circuit Court.
Kansas was not among the states in the legal proceedings. Officials with the Kansas attorney general’s office could not be reached for comment.
Missouri’s complaint alleged that S&P “knowingly assigned inflated credit ratings to toxic assets packaged and sold by the Wall Street investment banks.”
Attorney General Chris Koster said in a statement, “We believe that countless investors and market participants, including state regulators, were misled by S&P’s promise that its analysis was independent and objective.”
Federal regulators filed their suit after S&P announced Monday that legal actions were pending. It is the government’s first big enforcement action related to a credit rating agency’s actions before the 2008 crisis. S&P said it will vigorously defend itself against charges that it deemed “meritless.”
The court filings by the federal government appear to signal a new, tougher direction for the Justice Department, which has faced years of criticism for failing to punish those responsible for the crisis.
The crisis crested when a bubble in U.S. home prices popped, making it more difficult for people to refinance their mortgages and setting off a wave of defaults and foreclosures.
At least one S&P executive who had raised concerns about the company’s proposed methods for rating investments was ignored, the federal government said Monday. S&P executives expressed concern that lowering the ratings on some investments would anger the clients selling these investments and drive new business to S&P’s rivals.
“Put simply, this alleged conduct is egregious — and it goes to the very heart of the recent financial crisis,” Attorney General Eric Holder said Tuesday at a Washington news conference.