Justice Department Announces Plan to Administer Grant Funding Opportunities for Fiscal Year 2024 to Strengthen Community Safety
Remarks as prepared for delivery
Good morning, and thank you all for being here. I am joined today by my colleagues from the Justice Department: Acting Associate Attorney General [Stuart] Delery and Acting U.S. Attorney [Stephanie] Yonekura of the Central District of California. I also want to thank our distinguished state partners – including Attorneys General George Jepsen, of Connecticut; Jim Hood, of Mississippi; Gregory Zoeller, of Indiana; and Kathleen Kane, of Pennsylvania.
We are here to announce another major step forward in the Justice Department’s ongoing effort to safeguard the American people from financial fraud and misconduct; to protect the integrity of our financial system; and to hold accountable any individual or institution that violates the law and abuses the public trust.
The Department of Justice has reached an agreement totaling nearly $1.4 billion with the credit rating agency Standard & Poor’s Financial Services, or S&P – along with its parent corporation, McGraw Hill Financial. This agreement will resolve the Justice Department’s 2013 lawsuit against S&P, in addition to suits brought by 19 states and the District of Columbia. Our lawsuit alleged that S&P engaged in a scheme to defraud investors in structured financial products known as Residential Mortgage-Backed Securities, or RMBS, and Collateralized Debt Obligations, or CDOs.
On more than one occasion, the company’s leadership ignored senior analysts who warned that the company had given top ratings to financial products that were failing to perform as advertised. As S&P admits under this settlement, company executives complained that the company declined to downgrade underperforming assets because it was worried that doing so would hurt the company’s business. While this strategy may have helped S&P avoid disappointing its clients, it did major harm to the larger economy, contributing to the worst financial crisis since the Great Depression.
Under the terms of this settlement, S&P will pay a total of $1.375 billion, which will be divided between the federal government, 19 states, and the District of Columbia. S&P has also agreed to comply with the consumer protection statutes of every state involved – as well as Washington, D.C. – and to respond, in good faith, to requests for information or material concerning any possible violation of those laws. Finally, the company has agreed to a detailed statement of facts acknowledging the improper conduct that led to this settlement – contrasting what S&P said it was doing with what the company actually did.
This conduct was uncovered by a thorough Justice Department investigation that began in November 2009, and precipitated a lawsuit that the department filed nearly two years ago. Our suit alleged that, from at least 2004 until 2007, S&P engaged in a scheme to defraud investors by knowingly issuing inflated credit ratings for CDOs that misrepresented their creditworthiness and understated their risks – ultimately causing investors, including many federally-insured financial institutions, to lose billions of dollars. At the time, S&P claimed that its ratings were independent, objective, and not influenced by the company’s relationship with the issuers who hired S&P to rate the securities in question. In reality, the ratings were affected by significant conflicts of interest, and S&P was driven by its desire for increased profits and market share to favor the interests of issuers over investors.
The settlement we have reached today not only makes clear that this kind of conduct will never be tolerated by the Department of Justice – it also underscores our strong and ongoing commitment to pursue any company or entity that violated the law and contributed to the financial crisis of 2008. We have been aggressive in working to address every part of the financial system that contributed to the crisis – from those who originated loans, to those who serviced them, securitized them, and rated them inappropriately. We have never hesitated to investigate and prosecute any individual, institution, or organization that attempted to exploit our markets and take advantage of the American people. And as I have made clear from the moment I took office as Attorney General – six years ago today – we will never rest in our determination to use every legal tool at our disposal to achieve justice for all Americans.
This agreement also reaffirms that this Justice Department will never shrink from litigation, no matter how difficult or complex. As we have proven time and again – and as we made clear when we initiated legal action against S&P two years ago – we will not be deterred or outlasted. No unlawful conduct is too complicated to pursue. And no financial institution, at home or abroad, is too powerful to be held accountable for wrongdoing.
I’d like to thank everyone whose tireless efforts over the past six years have made this resolution possible – including our investigators, prosecutors, support staff, U.S. Attorneys, state Attorneys General and members of the President’s Financial Fraud Enforcement Task Force. It has been my honor to chair this task force since its launch in 2009. And I am extremely proud not only of the outstanding work it made possible in this case, but of the remarkable track record we’ve established – and our ongoing efforts to bring perpetrators of financial fraud to justice.
At this time, I’d like to turn things over to Acting Associate Attorney General Delery, who will provide additional details.