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A lawsuit filed by Berman DeValerio against the major credit rating agencies has drawn international media coverage as far away as India and New Zealand.
The lawsuit, which was filed on behalf of the California Public Employees’ Retirement System in July, grabbed headlines in The New Zealand Herald, the Business Standard in India, the Financial Standard in Australia, and O Globo in Brazil, among other newspapers. Articles also appeared on websites for the BBC, The Independent and the London Evening Standard in Great Britain and Frankfurter Allgemeine Zeitung in Germany.
The suit by CalPERS, the largest U.S. public pension fund, seeks to hold the three major credit rating agencies liable for issuing unjustifiably high ratings for structured investment vehicles, or SIVs, that the agencies knew included high-risk subprime mortgages. Filed in San Francisco Superior Court, the suit claims the agencies were negligent in misrepresenting the riskiness of the SIVs, which they also helped the issuers to structure. The three credit rating agencies have received blame for their widespread failure to identify risky investments in the run-up to the collapse of the world’s financial markets last year.
The lawsuit held that the ratings were "wildly inaccurate" for three SIVs, causing losses to CalPERS that the complaint said reached "hundreds of millions, and perhaps more than $1 billion."
It’s not surprising the case garnered attention in England, where two of the investment firms that sold the SIVs were based. The lawsuit does not name the hedge funds or the SIVs as defendants and places blame squarely on the rating agencies.
Major U.S. media outlets, including The Wall Street Journal and The New York Times also covered the story. The Times said the litigation was an example of “renewed scrutiny over the role that credit ratings agencies played in providing positive reports about risky securities issued during the subprime boom that have [since] lost nearly all of their value."
For a copy of the complaint, please click here. |
