CalPERS, CalSTRS Reach $324M Settlement With Standard & Poor’s
CaLPERS and the California State Teachers' Retirement System are set to receive a combined $324 million settlement from Standard & Poor's over the pension funds' investment losses, the Sacramento Bee reports.
Details of Settlement
On Tuesday, the Department of Justice announced the settlement with CalPERS and CalSTRS as part of a multistate, $1.5 billion agreement (Kasler, Sacramento Bee, 2/3).
The settlement will resolve lawsuits filed by DOJ and more than 12 states that alleged S&P had inflated crediting ratings.
CalPERS filed two lawsuits, one of which alleged S&P inflated credit grades on residential mortgages that ultimately failed (Young, Sacramento Business Journal, 2/3).
Under the settlement:
- CalPERS will receive $301 million; and
- CalSTRS will receive $23 million.
U.S. Attorney General Eric Holder in a statement said S&P "admits under this settlement" that it "declined to downgrade underperforming assets because it was worried that doing so would hurt the company's business."
Stephanie Yonekura -- acting U.S. attorney for Los Angeles -- said, "S&P played a central role in the crisis that devastated our economy by giving AAA ratings to mortgage-backed securities that turned out to be little better than junk." She added, "This historic settlement makes clear the consequences of putting corporate profits over honesty in the financial markets."
In a statement, CalPERS CEO Anne Stausboll said, "This money belongs to our members and will be put back to work to ensure their long-term retirement security" (Sacramento Bee, 2/3).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.