The case is U.S. v. McGraw-Hill, 13-00779, U.S. District Court, Central District of California (Los Angeles).
Critics Slam S&P For Deflection On U.S. Fraud Claims
February 7, 2013
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There is a basic underlying flaw to the current relationship between any financial institution that pays a rating agency to evaluate the quality of their assets, investments, claims-paying ability, and/or the financial viability of their individual products. The key word is "pay". How can you trust the ratings of any agency to which compensation for services was provided. It's a classic conflict-of-interest. Having actually read several company reports behind the ratings, I have discovered that it is not so much what the agency says about the company, but what it doesn't say. They're very careful not to comment - or comment obtusely - on an insurance carrier's or company's weaker areas. And, those of us that depend on such reports have no way of knowing which set of “books" were evaluated. Add to that the various GAAPs that are floating around out there and ratings are essentially useless. Unfortunately, they are the only measuring stick we have. When we use them, however, there should be a significantly large shaker of table salt within reach.
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Credit Rating Companies Favoring Borrowers Paying Most Credit-rating companies routinely award higher rankings to debt issued by banks and corporations that pay them the most, a conflict of interest that may escape Congressional efforts to change the way they do business. -- http://tinyurl.com/6fm58sb