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S&P Pays Nearly $1.38B To Settle Mortgage Crisis Claims

Financial ratings service Standard & Poor's will pay almost $1.38 billion to settle charges that it took part in a scheme in which investors lost billions of dollars after putting money into securities whose credit ratings didn't reflect their true risk.

Under the settlement, S&P parent company McGraw Hill Financial will make two payments of $687.5 million: one to the U.S. Justice Department and another that's divided among 19 states and the District of Columbia.

McGraw Hill says it will also pay $125 million to the California Public Employees' Retirement System.

The deal "contains no findings of violations of law," McGraw Hill points out in a statement released Tuesday morning. The settlements are not subject to a court's approval.

The news comes nearly two years after the Justice Department sued Standard & Poor's, "alleging that S&P engaged in a scheme to defraud investors in structured financial products known as Residential Mortgage-Backed Securities (RMBS) and Collateralized Debt Obligations (CDOs)."

In 2013, the agency said S&P's desire to grow its own profits led it to give a false impression of complex securities that were a key element of the recent U.S. mortgage crisis.

Today's settlements come less than two weeks after Standard & Poor's settled charges of fraudulent misconduct filed by the Securities and Exchange Commission over its rating of commercial mortgage-backed securities (CMBS). The service paid more than $77 million in that deal, with the bulk of the money going to the SEC and the rest going to New York and Massachusetts.

The SEC said Standard & Poor's Ratings Services "elevated its own financial interests above investors by loosening its rating criteria to obtain business and then obscuring these changes from investors."

Copyright 2015 NPR. To see more, visit http://www.npr.org/.

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