CalPERS Lawsuit Gets the Green Light

September 3, 2010 by · Leave a Comment
Filed under: CalPERS, The Ratings System 

The California Public Employees’ Retirement System (CalPERS), the largest U.S. public pension fund, has won a court ruling allowing it to proceed with a lawsuit against the three main credit rating agencies for assigning “wildly inaccurate and unreasonably high” ratings. The ratings in question were regarding the AAA rating of three structured investment vehicles (SIV) in 2006 that allegedly caused the pension fund $1 billion in losses.

CalPERS is accusing the rating agencies of “negligent misrepresentations to CalPERS and CalPERS’ money manager agents, which have caused and will cause CalPERS to suffer substantial investment losses” by overvaluing the SIVs.

CalPERS claims that the agencies were the “only entities” outside those managing the SIVs who knew what assets were held by the opaque structures.

This is hilarious! CalPERS, a huge expert pension fund, was duped by too high of a rating? The California Treasurer complains the muni ratings of the NRSROs were too low!! This all looks like blame shifting.