Investors have spurned firms hit with federal lawsuits. After paying a $550 million fine to settle charges from the U.S. Securities and Exchange Commission that it misled investors on sales of collateralized debt obligations, Goldman Sachs Group Inc. has yet to recover its market value, which fell to $73.5 billion yesterday from more than $100 billion before it was sued in April 2010.

McGraw-Hill dates back to 1888, when James H. McGraw acquired The American Journal of Railway Appliances, according to the company’s website. He later merged his book-publishing department with John A. Hill’s, creating the McGraw-Hill Book Co.

Terry McGraw, who graduated from Tufts University in Medford, Massachusetts, and has an MBA from the University of Pennsylvania’s Wharton School of Business, took a leave of absence in 1979 from GTE Corp., now part of Verizon Communications Inc., when he was brought in to defend the family legacy from American Express, Dionne said.

Left Astonished

He joined his brother Robert as they rallied around the late Harold W. McGraw Jr. while he beat back James D. Robinson III’s charge-card issuer. Bringing in his sons showed the family’s concern, “not only about the company, but all the people in the company,” Dionne said.

McGraw-Hill warded off its unwanted suitor in part by claiming one of its own directors violated his fiduciary duty, according to Dionne, who retired in 1998 after 15 years as CEO and more than 30 years at the company. The McGraw-Hill director was employed by American Express when it was planning the bid, he said.

“The McGraws were astonished that American Express would try to acquire a company that didn’t want to be acquired,” Martin Lipton, a founding partner of law firm Wachtell, Lipton, Rosen & Katz who represented the company at the time, said in a telephone interview on Feb. 19. “You have to recognize that in 1979 while there had been some hostile takeover attempts, there were virtually none in which a major established company went after another major established company.”

Corporate Transformation

McGraw formally joined the company in 1980, holding a variety of jobs that included publisher of Aviation Week and Space Technology magazine and head of the financial services division that included S&P.

He was named CEO in 1998, and transformed the company from a publisher into a financial services firm dominated by S&P, the world’s biggest credit-rater, which his father had bought in 1966. He cast off publications from Chemical Engineering to Modern Plastics to Businessweek, which was purchased in 2009 by Bloomberg LP, the parent of Bloomberg News.