Pennsylvania will see $19.4 million as part of a $863.7 million settlement between ratings agency Moody’s Corp. and various federal and state agencies.
The settlement stems from allegations that the New York-based credit-rating agency earned hefty fees while it inflated, and misrepresented the objectivity of, ratings of mortgage investments leading up to the 2008 recession, the U.S. Department of Justice announced Friday.
Pennsylvania will use its portion of the settlement to help agencies affected by Moody’s alleged actions: the Pennsylvania Department of Treasury, Public School Employees Retirement System, State Employees Retirement System and Pennsylvania Turnpike Commission.
“This is a landmark settlement that will result in meaningful reforms by Moody’s and a significant recovery of funds for many commonwealth agencies,” Pennsylvania Attorney General Bruce Beemer said in a news release Monday.
Those reforms include significant compliance terms, as well as Moody’s acknowledgement of key aspects of its conduct.
“After careful consideration, Moody’s determined that the agreement, which removes significant legacy legal risk and avoids costs and uncertainty associated with continued investigations and litigations, is in the best interest of the company and its shareholders,” the agency said in a statement Friday. “Moody’s stands behind the integrity of its ratings, methodologies and processes, and the settlement contains no finding of any violation of law, nor any admission of liability.”
Standard & Poor’s, another credit agency criticized for its practices leading up to the recession, reached a $1.4 billion agreement with the U.S. Justice Department in 2015 over similar allegations.
Pennsylvania received about $21.5 million from that settlement.