Hail Mary Motion Fails to Help S&P Investors
MANHATTAN (CN) - Supposed new evidence will not revive claims that Standard & Poor's ratings of residential mortgage-backed securities defrauded investors, a federal judge ruled.
The ruling Tuesday from U.S. District Judge Sidney Stein is a final nail to the lawsuit led by Claude Reese and the Boca Raton Firefighters and Police Pension Fund.
Investors had first sued the McGraw Hill-owned credit-rating agency and two of its executives - Harold McGraw III and Robert Bahash - in 2007 to recover losses tied to Standard & Poor's allegedly bogus ratings of mortgage-backed securities.
They claimed S&P's ratings were motivated not by an interest in the quality and accuracy of those ratings, but by its profits and need to maintain market share.
The case eventually moved from Washington, D.C., to New York.
Stein explained Tuesday that he had dismissed the second amended complaint in March 2012 after finding that "certain alleged misstatements were commercial puffery," and that the class failed to demonstrate the alleged misstatements were false.
The 2nd Circuit affirmed in December, but the investors claimed that the discovery of new information entitled them to the "exceptional remedy of relief from judgment."
That new information is the 119-page lawsuit against Standard & Poor's that the Department of Justice filed in February 2013 in Los Angeles.
The investors also cited deposition testimony that Frank Raiter, head of RMBS ratings for S&P, gave during discovery in a different lawsuit unsealed in July 2012.
Raiter allegedly claimed that S&P refused to implement a new, superior ratings model because it was satisfied with its current market share.
Stein nevertheless shot the investors down Tuesday.
"Plaintiffs' purported new evidence would not have changed the outcome of the original decision because those allegations do not correct the pleading defects for which the court dismissed its previous complaint," he wrote.