Jan. 18--The state will soon see a $31 million deposit in the general fund, and it comes with a pound of justice, thanks in large part to the efforts of the state attorney general's office.
The money comes from the settlement of a 2010 lawsuit, originally filed by Connecticut's former Attorney General Richard Blumenthal, against credit rating giant Moody's in the wake of the 2008 financial crisis. The lawsuit claimed that Moody's misled investors when it gave good ratings to mortgage-backed securities that it should have known were big risks.
The state also sued Standard & Poor's Financial Services at the time, and where other lawsuits against the agencies were rebuffed by claims that the agencies were simply giving investors advice, Connecticut's attorneys fashioned a novel legal argument that was ultimately successful. They relied on state laws that forbid deceptive sales and claimed that Standard & Poor's objectivity was tainted because the bankers who issued the securities paid the ratings agencies.
Standard & Poor's ultimately agreed to a $1.375 billion settlement about two years ago. Connecticut got $36 million from that deal.
The lawsuit against Moody's was put on hold until the Standard & Poor's case was resolved, but on Friday Attorney General George Jepsen announced that a settlement was reached. Moody's will pay nearly $874 billion, of which Connecticut will get $31.5 million.
"I am especially proud that it was the Connecticut Office of the Attorney General that developed the unique legal theory that proved foundational in both this case and the similar case against Standard & Poor's that we settled last year," Jepsen said in a prepared statement.
The pride is well placed. Connecticut attorneys share in the credit for holding Moody's and Standard & Poor's accountable. It's a victory for everyone who suffered the effects of the financial crisis, and it sends a message that the quest for profits must be done with integrity.
The settlement is a windfall with excellent timing, given the condition of the current state budget. This is not the first cash infusion to come from the attorney general's work this fiscal year. In October, the state announced a settlement in a lawsuit against RBS Securities Inc., a Stamford-based investment firm. That lawsuit was also about mortgage-backed securities. The attorney general's investigation claimed that "RBS's conduct was dishonest and/or unethical and that RBS made untrue statements in representing its securities products."
That settlement -- a cool $120 million -- was also expected. Some $40 million in "legal settlements" was baked into the current budget.
Connecticut can't expect to make a habit of balancing its books by suing financial services companies, but the lawyers in the attorney general's office should be commended nonetheless. They were right to hold Moody's and Standard & Poor's responsible for their roles in the worst financial crisis in a generation.
(c)2017 The Hartford Courant (Hartford, Conn.)
Visit The Hartford Courant (Hartford, Conn.) at www.courant.com
Distributed by Tribune Content Agency, LLC.
© Tribune Content Agency, source Regional News