Standard and Poor's to be hit with more lawsuits
17 Apr 2013
Stadards and Poor's is set to be hit with more law suits from councils and charities seeking to recoup losses after it was found liable in November for misleading Australian towns with investment ratings.
The ratings agency was sued yesterday by the city of Swan and Moree Plains Shire Council in Sydney federal court claiming the AAA, AA+, AA and AA- ratings given to synthetic collateralised debt obligations were misleading.
The two municipalities are representative plaintiffs for about 90 councils, religious organisations and funds who do not figure in the statement of claim.
''This filing in Australia will pave the way for further filings in Europe,'' John Walker, executive director of IMF (Australia) Ltd, the litigation funder, said in a statement. ''Rating agencies played a pivotal role in the misallocation of billions of dollars worldwide from 2005 to 2008 and it is important they be held accountable.''
According to the statement of claim, Swan and Moree Plains bought a series of notes valued at A$76.5 million ($79 million), which lost 83.3 per cent of their value.
The collateralised debt obligations, whose value tanked in the wake of the global financial crisis in 2007, represent some of the $5 trillion that was invested in the products around the world, according to Amanda Banton, a partner at Piper Alderman in Sydney, who represents the towns.
''Our ratings were based on the good faith judgment of our analysts and reflect what they knew at the time,'' S&P in Australia said today in an e-mailed statement, adding it would defend itself against the suit.
