Federal Court Denies S&P’s Motion to Dismiss $5 Billion RMBS Fraud Suit

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On July 16, Judge David O. Carter of the Federal District Court for the Central District of California denied Standard & Poor’s Financial Service LLC’s (S&P) motion to dismiss the U.S. government’s $5 billion fraud suit alleging that S&P intentionally issued false credit ratings of mortgage backed securities. In denying the motion, the court rejected S&P’s arguments that its statements about the securities were “puffery,” that the complaint fails to plead facts showing that the credit ratings were false or misleading, and that the complaint fails to plead scienter. The government’s claims are for civil penalties for alleged violations of criminal mail fraud, wire fraud and financial institution fraud statutes. Decision. Orrick covered this recent development and the Financial Institutions Reform Recovery Enforcement Act (FIRREA) here.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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