S&P Says Ratings Were Never Meant To Be Reliable

In attempt to defend against an SEC suit, McGraw Hill’s (MHP) S&P unit says they never expected anyone to believe their claims of objectivity and/or accuracy in their ratings.

Details are nicely summarized in this article from Intergrit Research: http://www.integrity-research.com/cms/2013/04/25/objective-ratings-i-said-that/

Many discrepancies in my research and that from S&P have led me to question the lack of analytical rigor or integrity in S&P’s research. Here is an example of how S&P’s measurement of Delta’s (DAL) liabilities is clearly incomplete.

See How Diligence Paid in 2012 for details on why analytical rigor, reading footnotes and due diligence matter.

Here is a excerpt from the Integrity Research coverage of S&P’s defense:

“S&P’s response is that the representations are vague, generalized statements that are not actionable as fraud.  Specifically, S&P offers three defenses.

  1. First, statements such as “S&P is highly valued by investors…for its analytical independence” are corporate puffery and not a sufficient basis for allegations of fraud.
  2. Second, S&P’s various codes of conduct, which were made public on S&P’s website and are extensively quoted in the complaint, “fail to state a claim for fraud because they are ‘couched in aspirational terms,’ not representations regarding current activity.”
  3. Finally, all other representations, including Congressional testimony, should be ignored as general and vague.  “Although these statements describe how S&P conducted its business activities, the statements are altogether too general and vague to constitute the basis for a fraud claim.”  Here is one of the statements cited in the Government’s complaint, taken from an S&P publication “The Fundamentals of Structured Finance Ratings” published August 23, 2007.  What do you think, is it too general and vague?”

Unbelievable…they will stoop to almost any level to save their hide even if they cause you to lose yours.

 

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