The Pennsylvania attorney general’s office has announced a settlement with financial services company Moody’s over misleading credit ratings.
The deal is going to net Pennsylvania nearly $20 million, with the money being distributed across several agencies that were affected by the deceptive ratings.
The Moody’s settlement is bigger than just the commonwealth, though — the full payout is $863.7 million, which will be divided among several states.
The firm was alleged to have artificially inflated ratings on mortgage securities in the years leading up to the 2008 housing market crash.
Neil Mara, Pennsylvania’s chief deputy attorney general for special litigation, started the investigations about two years ago alongside the Justice Department and the other affected states.
“The credit rating marketplace became intensely competitive in the years leading up to the global financial crisis,” he said. “The allegation is these companies were struggling to maintain market share.”
Basically, Mara said, the agency was supposed to act as a neutral adviser to states, but didn’t.
“When their ratings analysis is unreliable, it has a negative impact on the state agencies making their investments,” he said.
Moody’s isn’t the only financial company that faced a case like this — Standard and Poor’s came to a similar settlement in 2015.
Pennsylvania’s $19.4 million share of the Moody’s payout will be distributed across the four agencies that made investments based on the bad data: the Public School Employees Retirement System, the State Employees Retirement System, the Treasury, and the Turnpike Commission.