Iowa joins federal fraud lawsuit against Standard & Poor's

Iowa is among a dozen states that have joined a federal civil fraud suit against credit-ratings agency Standard & Poor's. 

The state's lawsuit filed in Polk County District Court, is part of a coordinated civil law enforcement effort by a bipartisan group of state attorneys general, the District of Columbia Attorney General, and the U.S. Department of Justice. The Justice Department filed a federal lawsuit in U.S. District Court for the Central District of California following an extensive investigation.

"We allege that S&P misled investors and market participants, which includes Iowa consumers," Miller said in a release. "The company falsely promised that its investment analyses were independent and objective.  People relied on these representations to make important financial decisions."

The Justice Department filed civil fraud charges late on Monday against the nation's largest credit-ratings agency and its parent company, McGraw-Hill Cos., accusing the firm of inflating the ratings of mortgage investments and setting them up for a crash when the financial crisis struck, The New York Times reported. 

The federal lawsuit alleges that Standard & Poor's high ratings made many investments appear safer than they actually were, and are now seen as having contributed to the financial crisis.

From September 2004 through October 2007, Standard  & Poor's "knowingly and with the intent to defraud, devised, participated in, and executed a scheme to defraud investors" in certain mortgage-related securities, the suit claims. S&P also falsely represented that its ratings "were objective, independent, uninfluenced by any conflicts of interest," the government alleges.