WSJ: Settlement Cost for Moody's, S&P, Morgan Stanley Is $225 Million

Monday, 29 Apr 2013 07:07 PM

 

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Morgan Stanley and two ratings agencies have agreed to pay about $225 million to settle lawsuits claiming they concealed risks in two mortgage-related deals that collapsed during the financial crisis, the Wall Street Journal reported on Monday.

The cost of the settlement will be shared equally among the investment bank and the two ratings firms, Moody's Investors Service and Standard & Poor's, according to the Journal.

The companies announced the settlement on Friday but did not disclose the amount.

The lawsuits had accused Moody's, a unit of Moody's Corp , and S&P, a unit of McGraw-Hill Cos, of negligent misrepresentation over their activities regarding the Cheyne and Rhinebridge structured investment vehicles (SIVs).

Morgan Stanley, which marketed both SIVs and helped structure the Rhinebridge SIV, faced similar accusations.

A trial in the Cheyne case had been scheduled for May 6.

In both cases, investors accused the ratings agencies of collaborating with banks in arranging for SIVs to receive ratings as high as "triple-A," even though much of the underlying collateral was low-quality or subprime mortgage debt.

The cases are Abu Dhabi Commercial Bank et al v. Morgan Stanley & Co et al, U.S. District Court, Southern District of New York, No. 08-07508; and King County, Washington et al v. IKB Deutsche Industriebank AG et al in the same court, No. 09-08387

© 2014 Thomson/Reuters. All rights reserved.

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