US - Five Ohio pension funds have filed a lawsuit against the three ratings agencies for allegedly providing strong ratings to mortgage backed securities in exchange for kickbacks from the issuing firms.
Ohio attorney general Richard Cordray claimed the inflated ratings issued by Moody's Investors Services, Fitch Ratings and Standard & Poor's eventually cost the pension funds US$457m.
Cordray filed the lawsuit on behalf of Ohio Public Employees Retirement System, the State Teachers Retirement System of Ohio, the Ohio Police & Fire Pension Fund, the School Employees Retirement System of Ohio and the Ohio Public Employees Deferred Compensation Program.
Cordray said: "The rating agencies assured our employee pension funds that many of these mortgage-backed securities had the highest credit ratings and the lowest risk. But they sold their professional objectivity and integrity to the highest bidder."
He said the agencies rated these mortgage-backed securities AAA despite allegedly knowing they carried a much higher that indicated by the rating.
Fitch spokesman Kevin Duignan declined to comment, stating the firm has not received the complaint.
Frank Briamonte, spokesman at McGraw Hill Companies, S&P's parent company said: "We believe the claim has no legal or factual merit, and we intend to defend ourselves vigorously against it. A recent SEC examination of our business practices found no evidence that decisions about ratings methodologies or models were based on attracting or losing market share."
Officials Moody's could not immediately be reached for comment.
The three ratings agencies have come under attack for assigning safe ratings to complex investments that eventually faltered during the financial crash.
In July, the California Public Employees Retirement System filed a lawsuit against the firms for providing "wildly inaccurate and unreasonable high" ratings to securities.
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