McGraw-Hill Cos. (MHP) and its Standard & Poor’s unit were sued by the U.S. over claims S&P knowingly understated the credit risks of instruments that were central to the worst financial crisis since the Great Depression.
The U.S. Justice Department filed a complaint yesterday in federal court in Los Angeles, accusing McGraw-Hill and S&P of mail fraud, wire fraud and financial institutions fraud. Under the Financial Institutions Reform, Recovery and Enforcement Act of 1989, the U.S. seeks civil penalties of as much as $1.1 million for each violation. The company’s shares tumbled the most in 25 years yesterday when it said it expected the lawsuit, the first federal case against a ratings firm for grades related to the credit crisis.
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