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Shareholders Go After Standard & Poor’s In Mortgage Debacle

WASHINGTON (CN) - Standard & Poor's gave unreasonably high ratings to bonds backed by subprime mortgages even as the market turned, and McGraw-Hill CFO Robert J. Bahash breached fiduciary duty by failing to disclose it, according to a class-action complaint in Federal Court.

Lead counsel Freeman, Wolfe & Greenbaum of Towson, Md., claims McGraw-Hill, which owns Poor's, reaped millions of dollars while over-rating the mortgage-backed securities, and misled investors by misrepresenting or failing to disclose the risk of the bonds backed by subprime loans. "Moreover, even as a downturn in the housing market caused rising delinquencies of the subprime mortgages underlying such bonds, Standard & Poor's maintained its excessively high ratings, rather than downgrade the bonds to reflect the true risk of owning subprime-mortgage-backed debt instruments," the complaint states.

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