Finally, a state judge has cleared the way for California's giant Public Employees Retirement System to sue the nation's three largest financial ratings firms which gave top Triple A ratings to toxic subprime mortgage loans.
Calpers, as it is called in California, claims it lost an estimated $1 billion in investments as a result of what it said were fraudulent ratings by Standard & Poor's, Moody's Investors Service and Fitch Ratings during the period of 2007 and 2008 before the housing market collapsed.
Judge Richard Kramer said Tuesday that Calpers could proceed after he dismissed the ratings firms' request to dismiss the case on grounds of negligent misrepresentation. Last week the court rejected Calpers' claim of negligent interference but could file an amended complaint later.
Similar suits have been filed in federal court in Manhattan by investor groups against the same three ratings firms.
At the heart of all the suits is the allegation that financial institutions duped the ratings firms which failed to independently investigate the bundled loans sold to outside investors such as Calpers.
The Calpers suit filed last July 9 claimed the risk assessments assigned as Triple A ratings were "wildly inaccurate" and “seriously flawed in conception and incompetently applied,”
The firms have denied wrongdoings.
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