Standard & Poor’s said Tuesday that the U.S. government filed a $5 billion fraud lawsuit against it in “retaliation” for its 2011 decision to strip the country of its “AAA” credit rating.
The McGraw Hill Financial unit was the only major credit rating agency to take away the United States’s top rating, and the only one sued by the Justice Department for allegedly misleading banks and credit unions about the credibility of its ratings prior to the 2008 financial crisis.
In a filing with the U.S. District Court in Santa Ana, Calif., S&P said the government’s “impermissibly selective, punitive and meritless” lawsuit was brought “in retaliation for defendants’ exercise of their free speech rights with respect to the creditworthiness of the United States of America.” It also said the “excessive fines” violated the Eighth Amendment.
S&P seeks to dismiss the lawsuit with prejudice, meaning it cannot be brought again. The August 2011 downgrade of the U.S. credit rating to “AA-plus” from “AAA” reflected concern about Washington’s ability to address the nation’s swelling debt.
A Justice Department spokeswoman declined to comment. On Feb. 5, Associate Attorney General Tony West said there was “no connection” between the downgrade and the filing of the lawsuit. The government said its investigation began in November 2009.
In its lawsuit, the government accused S&P of inflating ratings to win more fees from issuers and of failing to downgrade collateralized debt obligations despite knowing they were backed by deteriorating residential mortgage-backed securities.
Eastman Kodak, the photography pioneer that invented the digital camera, emerged from Chapter 11 bankruptcy protection Tuesday with plans to continue as a smaller digital imaging company.
The new Kodak will focus on commercial products such as high-speed digital printing technology and printing on flexible packaging for consumer goods.
“You can’t imagine how much I have been waiting for this moment. . . . This is a totally new company,” chief executive Antonio Perez told reporters.
Kodak, founded in 1880 by George Eastman, was for years synonymous with household cameras and family snapshots. It filed a $6.75 billion bankruptcy in January 2012, weighed down by high pension costs and a years-long delay in embracing digital camera technology.
The new company expects to have $2.5 billion in revenue this year, Perez said. The company said it has repaid its debtor-in-possession lenders and will receive about $406 million in new financing.
Kodak had hoped to fetch more than $2 billion through its bankruptcy process for about 1,100 patents related to digital imaging, but drew only $525 million for the portfolio, which experts said was a crucial reason it had to sell core businesses and reinvent itself.
l Google, which is known for nicknaming its Android mobile operating systems for smartphones and tablets after desserts, has for the first time chosen a brand-name candy for the 4.4 version expected to launch this fall: Kit Kat. Financial terms weren’t disclosed for the sweet deal between Google and Hershey, which makes Kit Kat.
l Oil rose Tuesday as Americans headed back to work and school after what AAA calls the third most expensive driving season on record. Benchmark crude for October delivery gained 89 cents, or 0.8 percent, to $108.54 a barrel on the New York Mercantile Exchange. Auto club AAA said gas prices during the summer driving season — lasting from Memorial Day through Labor Day — averaged $3.58 a gallon. That’s 3 cents more than a year ago and the third highest behind 2008’s average of $3.95 and 2011’s average of $3.65.
l Manufacturing expanded more than forecast in August to the fastest pace since June 2011. The Institute for Supply Management’s factory index climbed to 55.7 from the prior month’s 55.4, the Tempe, Ariz.-based group’s report showed Tuesday. Fifty is the dividing line between growth and contraction.
— From news services