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Rating agencies led pension system astray, suit says

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By Laura A. Bischoff, Staff Writer 2:20 PM Friday, November 20, 2009

Ohio’s public pension systems are suing Standard & Poor’s, Moody’s and Fitch — companies that provide credit ratings for investments — for leading them astray on shaky mortgage-backed securities, according to the lawsuit filed Friday, Nov. 20.

“The credit agencies sold out and they sold us out,” Ohio Attorney General Richard Cordray said. “They traded in their objectivity and in exchange received massive profits. As a result, Ohio police officers, firefighters, teachers, government workers, investors and retirees of all strips suffered terrible losses.”

Cordray alleges in the suit, filed in U.S. District Court, that the credit rating agencies actively participated in the push to sell bundled mortgage-backed securities and gave them undeserved, inflated triple A ratings.

Four of Ohio’s five pension systems and the Ohio Public Employees Deferred Compensation Program are plaintiffs. Cordray pegged the losses at a minimum of $457 million — money that the pension systems could use to pay health care costs and retirement checks.

California has a similar suit now pending against credit agencies, Cordray said.

Ohio’s public pension systems collectively hold $186 billion in investment portfolios and represent 1.7 million workers, retirees and beneficiaries.

Cordray said the lawsuit is an attempt at holding Wall Street accountable for its wrongs.

Contact this reporter at (614)224-1624 or lbischoff@DaytonDailyNews.com.

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