The California Public Employees’ Retirement System (CalPERS) has settled its ratings lawsuit against Moody’s for a record $130 million.
The $285 billion public pension fund sued Moody’s and other ratings agencies in 2009 after suffering losses from “AAA” rated investment vehicles. These assets relied on the liquidity of assets which turned out to be illiquid, including subprime mortgage-backed securities, collateralized debt obligations, and other asset-backed securities.
CalPERS had alleged that Moody’s “erroneous” ratings amounted to “negligent misrepresentations” of the investment vehicles.
“This should serve as a cautionary reminder to all investors who rely on rating agencies to guide their investments,” said Matthew Jacobs, CalPERS general counsel.
CalPERS settled with Standard & Poor’s (S&P) for $125 million early last year, for a total of $255 million from the now-concluded lawsuit. The settlements ranks as the largest known recovery from Moody’s and S&P in a private lawsuit for civil damages.
“This resolves our lawsuit against Moody’s and restores money that belongs to our members and employers,” Jacobs said. “We are eager to put this money back to work to help ensure the long-term sustainability of the fund.”