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California attorney general sues S&P

– California’s attorney general on Tuesday joined the U.S. Department of Justice and several other states in seeking billions of dollars in damages from the debt rating agency Standard & Poor’s for its alleged role in the mortgage crisis.

Attorney General Kamala Harris alleged in a lawsuit filed in San Francisco Superior Court that S&P lured the state’s public pension funds, ordinary Californians and others to invest in catastrophically bad mortgage-backed securities with unjustly inflated ratings.

The state’s civil charges mirror the allegations the U.S. Department of Justice made in a federal lawsuit filed late Monday in Los Angeles, accusing the company of fraud for giving high ratings to risky mortgage bonds that helped bring about the financial crisis. U.S. Attorney General Eric Holder announced the federal lawsuit Tuesday at a Washington, D.C., news conference.

The California attorney general joined Holder and other high-ranking Justice Department officials at the news conference along with attorneys general from Connecticut, Delaware, the District of Columbia, Illinois, Iowa and Mississippi who have filed or will file separate, similar civil fraud lawsuits against S&P. More states are expected to sue, the Justice Department said.

In particular, the California lawsuit alleges that the rating company’s actions led directly to a combined $1 billion loss for the California Public Employees Retirement System and the California State Teachers Retirement System.

From 2004 to 2007, S&P systematically misrepresented to the public and the state’s public pension funds that its ratings of structured finance securities were based on an independent, objective and reliable analysis, and not influenced by its economic interests, the complaint alleges.

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