Opinion

State of Maine v. The McGraw-Hill Co., Inc.

Court: Superior Court of Maine
Filed: Feb 9, 2015
Status: Unpublished
On the bench: M. Michaela Murphy
Cited by: 0 cases

The opinion

STATE OF MAINE SUPERIOR COURT

KENNEBEC, ss. CIVIL ACTION

DOCK.BTNO. BCD-CV- 14-49 J

STATE OF MAINE, )

)

Plaintiff )

)

v. )

)

) ORDER

THE MCGRAW-HILL COMPANlBS, )

INC. and STANDARD & POOR'S )

FINANCJAL SERVICES, LLC, )

)

Defendunt:. )

The Parlies' Joint Motion fo1· Judgment in Accordance With Settlement Agt'eement, having

hccn presented to this Court, it is hereby:

Judgment is entered in l\ccorcfonce with the terms and conditions in the Settlement Agree

ment attached ns Exhibit A, lhe langunge of which is incol'poratcd into the J\ldgmcnt by reference

including, without Iimitation, the statement of fools annexed thereto,

Date

~ 1~ !,<

Ho~~

Jt1stice of the Superior CO\ll't (, ·

.. ~

cnterecf on the Docket:_J. /Q, /S

Copics sent via Mail___Eloclronically~

1 Settlement Agreement

2 This Settlement Agreement ("Agreement") is entered into between, on the one

3 hand, the United States, acting through the United States Department of Justice ("DOJ"),

4 and the States of Arizona, Arkansas, California, Connecticut, Colorado, Delaware,

5 Idaho, Illinois, Indiana, Iowa, Maine, Mississippi, Missouri, New Jersey, North Carolina,

6 Pennsylvania, South Carolina, Tennessee, and Washington, and the District of

7 Columbia, acting through their respective Attorneys General (each of the District of

8 Columbia and the states set forth above referred to individually as "State" and

9 collectively as "the States"), and, on the other hand, McGraw Hill Financial, Inc.

10 (formerly known as The McGraw-Hill Companies, Inc.) and Standard & Poor's

11 Financial Services LLC ( collectively "Defendants"). The United States, the States, and

12 Defendants are collectively referred to herein as "the Parties."

13 Recitals

14 1. On February 4, 2013, the United States filed in United States District Court

15 for the Central District of California the case captioned Unjted States v. McG raw-H ill

16 Companies, Inc., and Standard & Poor's Financial Services LLC, No. CV 13-00779

17 DOC (the "US Case").

18 2. On the following dates, in the following courts, the States filed the cases

19 captioned as follows (collectively, the "State Cases"):

20 State Filing Court Caption

Date

Arizona 2/5/2013 Arizona Superior Arizona ex rel. Brnovich v. The

22 Court, Maricopa McGraw-Hill Companies, Inc., and

23 County Standard & Poor's Financial Services

LLC, No. CV2013-001188

24 Arkansas 2/5/2013 Arkansas Circuit Arkansas ex rel. M cDaniel v. The

25 Court, Pulaski McGraw-Hill Companies, Inc. , and

County Standard & Poor's Financial Services

26 LLC, No. 60CV-13-534

1 State Filing Court Caption

Date

California 2/5/2013 California Peo12le of the State of California v.

3 Superior Court, The McGraw-Hill Com12anies~ Inc.~

4 San Francisco Standard & Poor's Financial Services

County LLC, and Does 1-100, No. CGC-13

5 528491

6 Colorado 2/5/2013 District Court, State of Colorado ex rel. Coffman v.

City and County The McGraw-Hill Com12anies, Inc. ~

7 of Denver, State and Standard & Poor's Financial

8 of Colorado Services LLC, No. 2013-CV-30537

Connecticut 3/10/2010 Connecticut Connecticut v. The McGraw-Hill

9 Com12anies, Inc., and Standard &

Superior Court,

10 Judicial District Poor' s Financ ial Services LLC, No.

of Hartford at HHD-cv-10-600883 8-S

11 Hartford

12 Delaware 2/5/2013 Delaware Delaware v. The McGraw-Hill

Superior Court, Com12anies, Inc. , and Standard &

13 Poor' s Financ ial Serv ices LLC, No. N

New Castle

14 County 13C-02-044

District of 2/5/2013 D.C. Superior District of Columbia v. The McGraw-

Columbia Court Hill Com,ganies, Inc. , and Stand ard &

16 Poor' s LLC, Civ. No. 2013 CA

000997 B

Idaho 2/5/2013 Idaho 4th Judicial Idaho ex rel. Wasden v. The

18 District Court, McGraw-Hill Com2anies, Inc., and

Ada County Standard & Poor' s Financial Services

LLC, No. CV OC 1302154

20 Illinois 1/25/2012 Illinois Circuit Peo12le of the State of Illinois v. The

Court, Cook McGraw-Hill Com12anies, Inc., and

County Standard & Poor' s Financial Services

22 LLC, No. 12CH02535

Indiana 6/27/2013 Marion County Indiana ex rel. Mihalik v. McGraw

Superior Court Hill Financial, Inc., and Standard &

24 Poor's F inanc ial Services LLC, No.

49D03-1306-PL-025757.

Iowa 2/5/2013 Iowa District Iowa ex rel. Miller v. The McGraw-

26 Court, Polk Hill ComQanies, Inc., and Standard &

County Poor 1 S F inancial Services LLC, No.

EQCE73545

1 State Filing Court Caption

Date

Maine 2/5/2013 Maine Superior Maine v. The McGraw-Hill

3 Court, Kennebec ComQanies, Inc., and Standard &

4 County Poor's F inancial Servjces LLC, No.

BCD-CV-14-49

5 Mississippi 5/10/2011 Chancery Court Mississii;mi ex rel. Hood v. The

6 of the First McGraw-Hill ComQanies, In c .•

Judicial District, Standard & Poor' s Financial Services

7 Hinds County LLC. et al., No. G 2011-835S/2

8 Missouri 2/5/2013 Missouri Circuit Missouri ex rel. Koster, et al. v. T he

Court, Jackson McGraw-Hill ComQanies, Inc ., and

9 County at Kansas Standard &Poor's Financial Services

10 City LLC, No. 1316-cv02931

New Jersey 10/9/2013 Superior Court of John J. Hoffman. Acting Attorney

New Jersey, General of the State of N ew JeTsey ,

12 Essex County and Steve C. Lee, Acting D irector of

the New Jersey Division of Consumer

Affairs v. McGraw Hill Financial,

14 Inc. and Standard & Poor's Financial

Services LLC No. ESX-C-216-13

North Carolina 2/5/2013 North Carolina North Carolina ex rel. CooQer v. T he

16 Superior Court, McGraw-Hill C01.1112anies, Inc. , and

Wake County Standard & Poor' s Financial Services

LLC, No. 13CVS 001703

18 Pennsylvania 2/5/2013 Commonwealth Pennsxlvania v. The McGraw-Hill

Court of Com£anies, Inc. , and Standard &

Pennsylvania Poor' s Financial Services LLC, No.

20 58 MD 2013

South Carolina 2/13/2013 South Carolina South Carolina ex rel. Wilson v. The

Court of McGraw-Hill Com12anies, Inc., and

22 Common Pleas, Standard & Poor's Financial Services

Richland LLC No. 2013-CP-40-00951

Tennessee 2/5/2013 Tennessee Circuit Tennessee ex rel. Slate!):'. v. The

24 Court, Davidson M cGTaw-llill Comganies, Inc., and

County Standard & Poor' s Financial Services

LLC. No. 13C506

26 Washington 2/5/2013 Washington Washington v . The McGraw-Hill

Snohomish Com12anies, Inc .• and Standard &

County Superior Pom' s Financial Services LLC, No.

28 Court 13-2-025939

1 3. This Agreement sets out the terms on which the Parties, to avoid the delay,

2 uncertainty, inconvenience, and expense of further litigation, have agreed to settle the

3 claims made by the United States in the US Case and by the States in the State Cases.

4 To implement this Agreement and in consideration of the mutual promises and

5 obligations set forth in this Agreement, the Parties agree and covenant as follows:

6 Terms and Conditions

7 4. Definitions. The following terms used in this Agreement shall have the

8 following meanings:

9 a. "RMBS" means Residential Mortgage Backed Securities.

10 b. "CDO" means Collateralized Debt Obligation of any type, including

11 cash flow, synthetic, and hybrid collateralized debt obligations, including Collateralized

12 Loan Obligations and Collateralized Bond Obligations, and including any of these types

13 of CDOs in which some or all of the underlying collateral was other CDOs or credit

14 default swaps that referenced other CDOs.

15 c. "CDO of RMBS" means a CDO for which any of the collateral was

16 RMBS, another CDO of RMBS, or credit default swaps that referenced either RMBS or

17 any CDO of RMBS.

18 d. "CMBS" means Commercial Mortgage Backed Securities.

19 e. "SIV" means Structured Investment Vehicles.

20 f. "ABS" means Asset Backed Securities.

21 g. "Structured Finance Instruments" means RMBS, ABS, CMBS,

22 CDOs, including without limitation CDOs ofRMBS, and SIVs.

23 h. "Released Entities" means Defendants, together with any current

24 and former parent companies, direct and indirect subsidiaries and divisions, business

25 units, affiliates, and the successors and assigns of any of them.

26 1. "Covered Conduct" means: (1) all activities by the Released Entities

27 in connection with the issuance, confirmation, and surveillance of ratings for Structured

28 Finance Instruments, including modifications and adjustments to the procedures and

1 methodologies used to rate Structured Finance Instruments; and (2) all statements by the

2 Released Entities concerning the integrity, objectivity, independence and lack of

3 influence from business concerns of their activities in connection with the issuance,

4 confirmation, and surveillance of ratings for Structured Finance Instruments, including

5 statements concerning their Codes of Conduct and/or Business Ethics and Policies and

6 Procedures.

7 J. "Effective Date of this Agreement" means the date of signature of

8 the last signatory to this Agreement.

9 5. Statement of Facts. Defendants acknowledge the facts set out in the

10 Statement of Facts set forth in Annex 1, which is attached hereto and incorporated by

11 reference.

12 6. Payment. Defendants shall pay a total of $1,375,000,000.00 (the

13 "Settlement Amount") as follows:

14 a. Within thirty (30) calendar days of receiving written payment

15 processing instructions from the Department of Justice, Office of the Associate Attorney

16 General, Defendants shall pay $687,500,000.00 of the Settlement Amount by electronic

17 funds transfer to the Department of Justice. The entire amount of $687,500,000.00 is a

18 civil monetary penalty recovered pursuant to the Financial Institutions Reform, Recovery

19 and Enforcement Act of 1989 ("FIRREA"), 12 U.S.C. § 1833a.

20 b. Within the time limits specified below, Defendants shall pay the

21 States a total of $687,500,000.00 in the allocated amounts and pursuant to the terms set

22 forth below. The funds paid to the States may be used or expended in any way permitted

23 by applicable state law at each State's sole discretion. Except as specifically set forth

24 below with respect to the amounts listed in Paragraph 6(b )(xiii), as to which the Parties

25 agree that no characterization has been made, and in Paragraph 6(b )(xvi), as to which

26 $2,153,571.00 is to be paid as a penalty for alleged violation ofNorth Carolina law, no

27 portion of this $687,500,000.00 is paid as a civil monetary penalty, fine, or payment in

28 lieu thereof.

1 1. $21,535,714.00, and no other amount, will be paid by

2 Defendants to the State of Arizona pursuant to this Agreement and the terms of written

3 payment instructions from the State of Arizona, Office of the Attorney General. Said

4 payment shall, pursuant to state law, be used by the Arizona Attorney General for

5 attorneys' fees and other costs of investigation or litigation, for restitution, remediation,

6 or for other consumer protection purposes, or for other uses as permitted by governing

7 state law, within the discretion of the Attorney General. Payment shall be made by

8 electronic funds transfer within thirty (30) calendar days of receiving written payment

9 processing instructions from the State of Arizona, Office of the Attorney General.

10 11. $21,535,714.00, and no other amount, will be paid by

11 Defendants to the State of Arkansas pursuant to this Agreement and the terms of written

12 payment instructions from the State of Arkansas, Office of the Attorney General.

13 Payment shall be made by electronic funds transfer within thirty (30) calendar days of

14 receiving written payment processing instructions from the State of Arkansas, Office of

15 the Attorney General. The money paid by Defendants to the Arkansas Attorney General

16 shall be deposited in the Consumer Education and Enforcement Account to be used in

17 accordance with Act 763 of 2013 of the Arkansas General Assembly.

18 111. $210,000,000.00, and no other amount, will be paid by

19 Defendants to the State of California pursuant to this Agreement and the terms of written

20 payment instructions from the State of California, Office of the Attorney General.

21 Payment shall be made by electronic funds transfer within thirty (30) calendar days of

22 receiving written payment processing instructions from the State of California, Office of

23 the Attorney General.

24 IV. $21,535,714.00, and no other amount, will be paid by

25 Defendants to the Colorado Department of Law pursuant to this Agreement and the

26 terms of written payment instructions from the State of Colorado, Office of the Attorney

27 General. Payment shall be made by electronic funds transfer within thirty (30) calendar

28 days of receiving written payment processing instructions from the State of Colorado,

1 Office of the Attorney General. The money paid by Defendants to the Colorado

2 Department of Law is to be held, along with any interest thereon, in trust by the

3 Colorado Attorney General to be used for reimbursement of the State's actual costs and

4 attorneys' fees, the payment of restitution, if any, and for future consumer education,

5 consumer fraud, or antitrust enforcement purposes.

6 v. $36,000,000.00, and no other amount, will be paid by

7 Defendants to the State of Connecticut pursuant to this Agreement and the terms of

8 written payment instructions from the State of Connecticut, Office of the Attorney

9 General. Payment shall be made by electronic funds transfer within thirty (30) calendar

10 days of receiving written payment processing instructions from the State of Connecticut,

11 Office of the Attorney General.

12 v1. $25,000,000.00, and no other amount, will be paid by

13 Defendants to the State of Delaware pursuant to this Agreement and the terms of written

14 payment instructions from the State of Delaware, Office of the Attorney General.

15 Payment shall be made by electronic funds transfer within thirty (30) calendar days of

16 receiving written payment processing instructions from the State of Delaware, Office of

17 the Attorney General. The payment to the State of Delaware shall be used, to the

18 maximum extent possible, for purposes of providing restitution and remediating harms to

19 the State and its communities, including harm to the State's operating revenues,

20 allegedly resulting from unlawful conduct of the Released Entities, including funding

21 efforts to address the mortgage and foreclosure crisis, financial fraud and deception, and

22 housing-related issues.

23 v11. $21,535,714.00, and no other amount, will be paid by

24 Defendants to the District of Columbia pursuant to this Agreement and the terms of

25 written payment instructions from the District of Columbia, Office of the Attorney

26 General. Payment shall be made by electronic funds transfer within thirty (30) calendar

27 days of receiving written payment processing instructions from the District of Columbia,

28 Office of the Attorney General.

1 v111. $21,535,714.00, and no other amount, will be paid by

2 Defendants to the State of Idaho pursuant to this Agreement and the terms of written

3 payment instructions from the State of Idaho, Office of the Attorney General. Payment

4 shall be made by electronic funds transfer within thirty (30) calendar days of receiving

5 written payment processing instructions from the State of Idaho, Office of the Attorney

6 General.

7 lX. $52,500,000.00, and no other amount, will be paid by

8 Defendants to the State of Illinois pursuant to this Agreement and the terms of written

9 payment instructions from the State of Illinois, Office of the Attorney General. Payment

10 shall be made by electronic funds transfer within thirty (30) calendar days of receiving

11 written payment processing instructions from the State of Illinois, Office of the Attorney

12 General for ultimate deposit in the following funds: (a) designated state pension funds,

13 and (b) the Attorney General State Projects and Court Ordered Distribution Fund (the

14 801 fund). Any payment to the 801 fund shall be made for subsequent expenditure at the

15 sole discretion of and as authorized by the Illinois Attorney General.

16 x. $21,535,714.00, and no other amount, will be paid by

17 Defendants to the State of Indiana pursuant to this Agreement and the terms of written

18 payment instructions from the State of Indiana, Office of the Attorney General. Payment

19 shall be made by electronic funds transfer within thirty (30) calendar days of receiving

20 written payment processing instructions from the State of Indiana, Office of the Attorney

21 General.

22 Xl. $21,535,714.00, and no other amount, will be paid by

23 Defendants to the State of Iowa pursuant to this Agreement and the terms of written

24 payment instructions from the State of Iowa, Office of the Attorney General. Payment

25 shall be made by electronic funds transfer within thirty (30) calendar days of receiving

26 written payment processing instructions from the State of Iowa, Office of the Attorney

27 General. The payment shall be used at the sole and complete discretion of the Attorney

28 General of Iowa, for any use permitted by law or this Settlement Agreement, including

1 but not limited to: (a) Purposes intended to ameliorate the effects of the financial crisis;

2 to enhance law enforcement efforts to prevent and prosecute financial fraud and unfair or

3 deceptive acts or practices, including funding for training and staffing of financial fraud

4 or general consumer protection efforts; and to compensate the State of Iowa for costs

5 resulting from the alleged unlawful conduct of the Defendants, including losses

6 sustained by State employee pension plans or other State government funds due to the

7 financial crisis. (b) Public education relating to consumer fraud and for funding for

8 enforcement of Iowa Code section 714.16, including reimbursement of investigative and

9 litigation costs incurred by the Iowa Attorney General's Office in connection with this

10 lawsuit. ( c) Any other lawful purpose.

11 xn. $21,535,714.00, and no other amount, will be paid by

12 Defendants to the State of Maine pursuant to this Agreement and the terms of written

13 payment instructions from the State of Maine, Office of the Attorney General. Payment

14 shall be made by electronic funds transfer within thirty (30) calendar days of receiving

15 written payment processing instructions from the State of Maine, Office of the Attorney

16 General. The payment to the State of Maine, Office of the Attorney General, shall be

17 used in the sole discretion of the Attorney General for reimbursement of costs and

18 attorneys' fees; restitution; consumer protection, health and education, including

19 financial literacy and student loan issues; law enforcement; litigation support; and efforts

20 to remediate the effects of the mortgage and financial crisis. Said funds are to be used to

21 supplement and not to supplant existing programs.

22 xm. $33,000,000.00, and no other amount, will be paid by

23 Defendants to the State of Mississippi pursuant to this Agreement and the terms of

24 written payment instructions from the State of Mississippi, Office of the Attorney

25 General. The State of Mississippi disclaims paragraph 6(b) to the extent that the State of

26 Mississippi does not characterize the payment. Payment shall be made by electronic

27 funds transfer within thirty (30) calendar days of receiving written payment processing

28 instructions from the State of Mississippi, Office of the Attorney General.

1 xiv. $21,535,714.00, and no other amount, will be paid by

2 Defendants to the State of Missouri pursuant to this Agreement and the terms of written

3 payment instructions from the State of Missouri, Office of the Attorney General, to be

4 distributed thereafter in a manner to be determined by the Missouri Attorney General and

5 Missouri Commissioner of Securities. Payment shall be made by electronic funds

6 transfer within thirty (30) calendar days of receiving written payment processing

7 instructions from the State of Missouri, Office of the Attorney General.

8 xv. $21,535,714.00, and no other amount, will be paid by

9 Defendants to the State of New Jersey pursuant to this Agreement and the terms of

10 written payment instructions from the State ofNew Jersey, Office of the Attorney

11 General. Payment shall be made by electronic funds transfer within thirty (30) calendar

12 days of receiving written payment processing instructions from the State of New Jersey,

13 Office of the Attorney General.

14 xv1. $21,535,714.00, and no other amount, will be paid by

15 Defendants to the Plaintiff State of North Carolina ex rel. Cooper pursuant to this

16 Agreement and the terms of written payment instructions from the North Carolina

17 Attorney General's Office. Payment shall be made within thirty (30) calendar days of

18 receiving written payment processing instructions from the North Carolina Attorney

19 General's Office. $2,153,571.00 of said payment shall be deemed a penalty under North

20 Carolina law. $19,382,143.00 of said payment shall be used by the North Carolina

21 Attorney General for attorneys' fees and other costs of investigation or litigation, placed

22 in or applied to the consumer protection fund, and for consumer protection purposes and

23 other uses permitted by law, at the sole discretion of the Attorney General; this amount

24 of$19,382,143.00 is not a fine, penalty, or payment in lieu thereof.

25 xvii. $21,535,714.00, and no other amount, will be paid by

26 Defendants to the Commonwealth of Pennsylvania, Office of Attorney General pursuant

27 to this Agreement and the terms of written payment instructions from the

28 Commonwealth of Pennsylvania, Office of the Attorney General. Payment shall be

1 made by electronic funds transfer within thirty (30) calendar days of receiving written

2 payment processing instructions from the Commonwealth of Pennsylvania, Office of the

3 Attorney General. The Commonwealth of Pennsylvania Office of Attorney General

4 shall receive $5,035,714.00 to reimburse it for its costs of investigating and litigating this

5 case and to be used for future public protection and education purposes. The

6 Pennsylvania Office of the Governor/Office of the Budget, the Pennsylvania Insurance

7 Department, the Pennsylvania Treasury Department, the Pennsylvania State Employees'

8 Retirement System ("SERS"), the Pennsylvania Public School Employees' Retirement

9 System ("PSERS"), and the Pennsylvania Municipal Retirement System ("PMRS") will

10 receive $250,000.00 each to reimburse them for their costs in responding to discovery,

11 and the remainder shall be distributed and divided among those Commonwealth agencies

12 who purchased RMBS and CDOs, including the Pennsylvania Treasury Department,

13 Pennsylvania State Employees' Retirement System, the Pennsylvania Public School

14 Employees' Retirement System, the Pennsylvania Municipal Retirement System, and the

15 Pennsylvania Turnpike Commission, in approximate proportion to their purchases of

16 RMBS and CDOs as determined in the sole discretion of the Commonwealth of

17 Pennsylvania, Office of Attorney General.

18 xviii. $21,535,714.00, and no other amount, will be paid by

19 Defendants to the State of South Carolina pursuant to this Agreement and the terms of

20 written payment instructions from the State of South Carolina, Office of the Attorney

21 General. Payment shall be made by electronic funds transfer within thirty (30) calendar

22 days of receiving written payment processing instructions from the State of South

23 Carolina, Office of the Attorney General. South Carolina may allocate such payment in

24 the South Carolina Attorney General's sole discretion and in accordance with any and all

25 obligations imposed by law for purposes including, but not limited to, a consumer

26 protection enforcement fund, consumer education fund, consumer litigation fund, local

27 consumer aid fund, or revolving fund; for attorneys' fees and other costs of investigation

28 and litigation; for cy pres purposes; or for any other uses not prohibited by law.

1 xix. $25,000,000.00, and no other amount, will be paid by

2 Defendants to the State of Tennessee, Office of the Attorney General pursuant to this

3 Agreement and the terms of written payment instructions from the State of Tennessee,

4 Office of the Attorney General. Payment shall be made by electronic funds transfer

5 within thirty (30) calendar days of receiving written payment processing instructions

6 from the State of Tennessee, Office of the Attorney General. Said funds include the

7 Tennessee Attorney General's legal fees and costs of investigation and prosecution of

8 this matter. All funds will be distributed at the sole discretion of the Tennessee Attorney

9 General.

10 xx. $21,535,714.00, and no other amount, will be paid by

11 Defendants to the State of Washington pursuant to this Agreement and the terms of

12 written payment instructions from the State of Washington, Office of the Attorney

13 General. Payment shall be made by electronic funds transfer within thirty (30) calendar

14 days of receiving written payment processing instructions from the State of Washington,

15 Office of the Attorney General. The payment to the State of Washington, Office of the

16 Attorney General, shall be distributed as follows: $500,000 shall be retained by the

17 Attorney General for reimbursement of investigative and litigation costs in this case;

18 $3,000,000 shall be distributed at the sole discretion of the Attorney General for cy pres

19 to remediate effects of the mortgage and financial crisis; the Attorney General shall

20 cause the remaining $18,035,714 to be deposited into the State General Fund.

21 xx1. $4,500,004.00, and no other amount, will be paid by

22 Defendants to the National Association of Attorneys General Financial Services and

23 Consumer Protection Enforcement, Education and Training Fund pursuant to this

24 Agreement and the terms of written payment instructions from the National Association

25 of Attorneys General. Payment shall be made by electronic funds transfer within thirty

26 (30) calendar days of receiving written payment processing instructions from the

27 President of the National Association of Attorneys General.

1 7. Compliance Measures.

2 a. Defendants shall comply with the following particular State laws

3 (collectively, "the Particular State Laws" and, with respect to each State, "that State's

4 Particular Laws"):

5 1. State of Arizona. Arizona Consumer Fraud Act, Ariz. Rev.

6 Stat. Sec. 44-1521 et seq.

7 11. State of Arkansas. Arkansas Deceptive Trade Practices Act

8 (ADTPA), Ark. Code Ann.§§ 4-88-107(a)(l), 4-88-107(a)(l0), and 4-88-108.

9 111. State of California. California Business and Professions Code

10 Sections 17200 et seq., the Unfair Competition Law, and Sections 17500 et seq., the

11 False Advertising Law.

12 IV. State of Connecticut. Connecticut Unfair Trade Practices

13 Act, Conn Gen. Stat. Sec. 42-1 lOa et seq.

14 v. State of Colorado. Colorado Consumer Protection Act,

15 C.R.S. §§ 6-1-101, et seq.

16 v1. State of Delaware. Delaware Consumer Fraud Act, 6 Del. C .

17 §§ 2511 et seq.; Delaware Deceptive Trade Practices Act, 6 Del. C. §§ 2531 et seq.

18 vu. District of Columbia. Consumer Protection Procedures Act,

19 D.C. Code§ 28-3904(e) and (f); Securities Act of 2000, D.C. Code§ 31

20 5605.02(a)(l)(B) and (a)(l)(C).

21 viii. State of Idaho. Idaho Consumer Protection Act, Idaho Code

22 § 48-601 et seq.; Idaho Rules of Consumer Protection, IDAPA 04.02.01.000 et seq.

23 IX. State of Illinois. The Illinois Consumer Fraud and Deceptive

24 Business Practices Act, 815 ILL. COMP. STAT.§ 505/1, et seq., and Uniform

25 Deceptive Trade Practices Act, 815 ILL. COMP. STAT.§ 510/1, et seq.

26 x. State of Indiana. Indiana Deceptive Consumer Sales Act,

27 Indiana Code chapter 24-5-0.5; Indiana Uniform Securities Act, Indiana Code article 23

28 19.

1 XI. State of Iowa. Iowa Consumer Fraud Act, Iowa Code section

2 714.16.

3 XII. State of Maine. Maine Unfair Trade Practices Act, 5 M.R.S.

4 section 205-A et seq.

5 xm. State of Mississippi. Mississippi Consumer Protection Act,

6 Miss. Code Ann. § 75-24-1 et seq.

7 XIV. State of Missouri. Sections 407.020, RSMo, Missouri

8 Merchandising Practices Act, and 409.5-501(2), 409.5-501(3), and 409.5-502, RSMo,

9 Missouri Securities Act.

10 xv. State of New Jersey. New Jersey Consumer Fraud Act,

11 N.J.S.A. 56:8-1 et seq.; New Jersey Regulations Governing General Advertising,

12 N.J.A.C. I3:45A-9.1 et seq.

13 xv1. State of North Carolina. North Carolina Unfair and

14 Deceptive Trade Practices Act, N.C. Gen. Stat.§§ 75-1.1 et seq.

15 xvii. Commonwealth of Pennsylvania. Unfair Trade Practices and

16 Consumer Protection Law, 73 P.S. §§ 201-1 et seq.

17 xviii. State of South Carolina. South Carolina Unfair Trade

18 Practices Act, S.C. Code§§ 39-5-10 et seq.; South Carolina Uniform Securities Act of

19 2005, S.C. Code§§ 35-1-101 et seq.

20 xix. State of Tennessee. Tennessee Consumer Protection Act,

21 Tenn. Code Ann.§ 47-18-101 et seq.

22 xx. State of Washington. Washington Consumer Protection Act,

23 RCW 19.86.

24 b. Defendants' obligation to comply with the Particular State Laws

25 specified in Paragraph 7(a) above shall have no effect on any obligations Defendants

26 may have to comply with other state laws not specified above.

27 c. For a period of five (5) years commencing on the Effective Date of

28 this Agreement, Defendants shall, upon request from any State expressing a concern

1 over a possible violation of that State's Particular Laws as specified in Paragraph 7(a)

2 above, meet and confer in good faith with that State regarding its expressed concern and

3 any requests from that State to provide information and documents to address the State's

4 expressed concern. In connection with such a meet and confer, information and

5 documents responsive to a State's request will not be unreasonably withheld by

6 Defendants and, to the extent a protective order was entered in that State's State Case,

7 will not be subjected by Defendants to terms governing their release to that State that are

8 more restrictive than those contained in that protective order. The States and Defendants

9 each reserve their respective rights with respect to any effort by the States to pursue and

10 obtain information and documents through formal process or otherwise.

11 d. Any State that obtains information or documents pursuant to

12 Paragraph 7(c) above may share such information or documents with the other States,

13 provided that such other States agree and are able to maintain the confidentiality of the

14 information or documents as agreed to by the State or States that originally received the

15 information or documents.

16 8. Withdrawal of Defense. Prior to the filing of the Joint Stipulation of

17 Dismissal provided for in Paragraph 9(a) of this Agreement, Defendants shall file in the

18 US Case a withdrawal of their Eleventh Affirmative Defense, which asserts Defendants'

19 claim that the US Case was filed in retaliation for Standard & Poor's Ratings Services'

20 2011 decisions to place on credit watch negative and subsequently downgrade the credit

21 rating of the United States.

22 9. Resolution of Pending Cases. As soon as practicable, but in no event later

23 than fourteen ( 14) calendar days after the Effective Date of this Agreement,

24 a. Defendants and the United States shall sign and file in the US Case a

25 Joint Stipulation of Dismissal of the US Case pursuant to Federal Rule of Civil

26 Procedure 41(a)(l)(A)(ii), in the form attached hereto as Annex 2. This Agreement may

27 be attached as an exhibit to the Joint Stipulation.

1 b. Defendants and the District of Columbia shall sign and file in the

2 District of Columbia State Case a Joint Stipulation of Dismissal pursuant to D.C. Super.

3 Ct. R. Civ. P. 41(a)(l(ii). This Agreement may be attached as an exhibit to the Joint

4 Stipulation. Paragraph 9(c) of this Agreement shall not apply to the District of

5 Columbia. In any action by the District of Columbia alleging a violation by Defendants

6 of its Particular State Laws under Paragraph 7(a), personal jurisdiction over Defendants

7 must be established by facts independent of the existence of this Agreement.

8 c. Defendants and each of the States (other than the District of

9 Columbia) shall sign and file in each respective State Case stipulated judgments, consent

10 judgments, or similar pleadings as provided by the rules of practice in each of the States

11 to bring formal legal proceedings to a close and memorialize the terms of this

12 Agreement, including without limitation the Compliance Measures set forth in Paragraph

13 7 of this Agreement, in an enforceable judgment. This Agreement shall be attached as

14 an exhibit to any such filed papers. With respect to enforcement of any State court

15 judgment obtained pursuant to this paragraph:

16 1. Defendants and the States agree that the State court in which

17 the judgment is entered shall have exclusive jurisdiction over any claim by either the

18 Defendants or the Attorney General of the State that there has been a violation of any of

19 the terms of this Agreement, other than a claim by the Attorney General of the State that

20 Defendants have violated Paragraph 7(a) of this Agreement.

21 11. Defendants and the States agree that if the Attorney General of

22 any State, who shall be the only person authorized to pursue a claim pursuant to this

23 Agreement or that State's State court judgment that a violation of that State's Particular

24 Laws constitutes a violation of Paragraph 7(a) of this Agreement or of such State court

25 judgment, asserts such a claim, that claim shall be pursued in the State court in which the

26 judgment is entered as an action to enforce the State court judgment; with respect to any

27 such action, Defendants and the States agree: (a) Defendants shall not remove any such

28 action to federal court; (b) Defendants reserve the right to assert any rights or defenses,

1 including without limitation, Constitutional or jurisdictional rights and defenses,

2 including without limitation a claim that the State court lacks personal jurisdiction based

3 on the conduct alleged to constitute a violation of that State's Particular Laws; and (c)

4 the States reserve the right to assert all arguments in response to any asserted rights or

5 defenses, including without limitation any arguments based on prior decisions in any of

6 the State Cases or In re: Standard & Poor's Rating Agency Litigation, 13-MD-2446

7 (JMF) (S.D.N.Y.), but agree that personal jurisdiction over Defendants must be

8 established by facts independent of the existence of this Agreement or the State court

9 judgment entering the same.

10 10. Releases by the United States. Subject to the exceptions in Paragraph 12

11 of this Agreement ("Excluded Claims"), and conditioned upon Defendants' filing of a

12 withdrawal of their Eleventh Affirmative Defense as provided in Paragraph 8 of this

13 Agreement and Defendants' full and timely payment of the Settlement Amount, the

14 United States fully and finally releases the Released Entities from any civil claims the

15 United States has for Covered Conduct occurring between January 2004 and December

16 2007 under FIRREA, 12 U.S.C. § 1833a; the False Claims Act, 31 U.S.C. § § 3729

17 3733; the common law theories of negligence, gross negligence, payment by mistake,

18 unjust enrichment, breach of fiduciary duty, breach of contract, misrepresentation,

19 deceit, fraud, or aiding and abetting any of the foregoing; or any other claim that the

20 Civil Division of the Department of Justice has actual and present authority to assert and

21 compromise pursuant to 28 C.F.R. § 0.45(d) and U).

22 11. Releases by the States. Subject solely to the exceptions set forth in

23 Paragraph 12 of this Agreement ("Excluded Claims"), the conditions set forth in this

24 paragraph below, and any particular conditions or exceptions set forth in the

25 subparagraph below defining each State's release, each of the States fully and finally

26 releases the Released Entities in accordance with the terms set forth in the subparagraph

27 below defining that State's release. Each State's release of claims below is expressly

28 conditioned on Defendants' full and timely payment of the Settlement Amount,

1 including without limitation payment to each of the States as specified in Paragraph 6(b)

2 of this Agreement, and (except for the District of Columbia) on the entry of a stipulated

3 judgment, consent judgment, or other enforceable judgment implementing the terms of

4 this Agreement in accordance with Paragraph 9( c) of this Agreement.

5 a. Releases by the State of Arizona. The Arizona Attorney General

6 fully and finally releases the Released Entities from any civil claim that was or could

7 have been brought based on: (a) the facts alleged in his Complaint dated February 5,

8 2013, Maricopa County Superior Court case no. CV 2013-001188 ("Arizona's State

9 Case"), for the period of January 1, 2001 through February 5, 2013; or (b) the Covered

10 Conduct for the period of January 1, 2001 through December 31, 2012. The Arizona

11 Attorney General executes this release in his official capacity and releases only claims

12 that the Arizona Attorney General has the authority to bring and release.

13 b. Releases by the State of Arkansas. The State of Arkansas fully and

14 finally releases the Released Entities from any civil claim that was or could have been

15 made by the Attorney General of the State of Arkansas based on: (a) the facts alleged in

16 the Complaint filed and dated February 5, 2013, or in the Amended Complaint filed and

17 dated July 9, 2014, in Pulaski County Circuit Court as Case no. 60-CV-13-534, for the

18 period of January 1, 2001 through July 9, 2014; or (b) the Covered Conduct for the

19 period of January 1, 2001 through December 31, 2012. The Arkansas Attorney General

20 executes this release in her official capacity and releases only claims that the Arkansas

21 Attorney General has the authority to bring and release.

22 c. Releases by the State of California. The California Attorney

23 General fully and finally releases the Released Entities from any civil claim that was or

24 could have been brought based on: (a) the facts alleged in her Complaint dated February

25 5, 2013, San Francisco Superior Court case no. CGC-13-52849 ("California's State

26 Case"), for the period of January 1, 2001 through February 5, 2013; or (b) the Covered

27 Conduct for the period of January 1, 2001 through December 31, 2012. The California

28 Attorney General executes this release in her official capacity and releases only claims

1 that the California Attorney General has the authority to bring and release. The

2 California Attorney General and Defendants acknowledge that they have been advised

3 by their attorneys of the contents and effect of Section 1542 of the California Civil Code

4 ("Section 1542") and hereby expressly waive with respect to this Agreement any and all

5 provisions, rights, and benefits conferred by Section 1542 which states: "A general

6 release does not extend to claims which the creditor does not know or suspect to exist in

7 his or her favor at the time of executing the release, which if known by him or her must

8 have materially affected his or her settlement with the debtor."

9 d. Releases by the State of Colorado. The State of Colorado fully and

10 finally releases the Released Entities from any civil claim that was or could have been

11 brought based on: (a) the facts alleged in the State of Colorado's Complaint dated

12 February 5, 2013, Denver District Court Case No. 2013cv30537 ("Colorado's State

13 Case"), for the period of January 1, 2001, through February 5, 2013; or (b) the Covered

14 Conduct for the period of January 1, 2001 through December 31, 2012. The Colorado

15 Attorney General executes this release in her official capacity and releases only the

16 claims that the Colorado Attorney General has the authority to bring and release.

17 e. Releases by the State of Connecticut. The State of Connecticut,

18 acting through the Office of the Connecticut Attorney General, fully and finally releases

19 the Released Entities from any civil claim that was or could have been brought based on:

20 (a) the facts alleged in its Complaint dated March 10, 2010, Hartford Superior Court

21 docket no. HHD-cv-XX-XXXXXXX ("Connecticut's State Case"), for the period of January

22 1, 2000 through March 10, 2010; or (b) the Covered Conduct for the period of January 1,

23 2001 through December 31, 2012. The Connecticut Attorney General executes this

24 release in his official capacity and releases only claims that the Connecticut Attorney

25 General has the authority to bring and release.

26 f. Releases by the State of Delaware. The Delaware Attorney General

27 fully and finally releases the Released Entities from any civil claim that was or could

28 have been brought based on: (a) the facts alleged in the Complaint dated February 5,

1 2013, or in the First Amended Complaint dated August 13, 2014, Delaware Superior

2 Court Case C.A. No. N13C-02-044(RRC) ("Delaware's State Case"), for the period of

3 January 1, 2001 through August 13, 2014; or (b) the Covered Conduct for the period of

4 January 1, 2001 through December 31, 2012. The Delaware Attorney General executes

5 this release in his official capacity and releases only claims that the Delaware Attorney

6 General has the authority to bring and release.

7 g. Releases by the District of Columbia. The District of Columbia

8 fully and finally releases Defendants from any civil claim that was or could have been

9 brought by the District of Columbia based on: (a) the factual allegations in the District of

10 Columbia's Complaint, filed on February 5, 2013, in District of Columbia Superior

11 Court, Civ. No. 2013 CA 000997 B, for the period of January 1, 2001 through February

12 5, 2013; or (b) the Covered Conduct for the period of January 1, 2001 through December

13 31, 2012.

14 h. Releases by the State of Idaho. The Idaho Attorney General fully

15 and finally releases the Released Entities from any civil claim that was or could have

16 been brought based on: (a) the facts alleged in his February 5, 2013 Complaint or his

17 June 17, 2014 Amended Complaint filed in the Fourth Judicial District of Idaho, Ada

18 County, Case No. CV OC 1302154 ("Idaho's Case"), for the period of January 1, 2001

19 through June 17, 2014; or (b) the Covered Conduct for the period of January 1, 2001

20 through December 31, 2012. The Idaho Attorney General executes this release in his

21 official capacity and releases only claims that the Idaho Attorney General has the

22 authority to bring and release.

23 1. Releases by the State of Illinois. The Illinois Attorney General fully

24 and finally releases the Released Entities from any civil claim that was or could have

25 been brought based on: (a) the facts alleged in her Complaint dated January 25, 2012,

26 filed in the Circuit Court of Cook County, Illinois, County Department, Chancery

27 Division, Case No. 12 CH 02535 (the "Illinois State Case"), for the period of January 1,

28 2001 through January 25, 2012; or (b) the Covered Conduct for the period of January 1,

1 2001 through December 31, 2012. The Illinois Attorney General executes this release in

2 her official capacity and releases only claims that the Illinois Attorney General has the

3 authority to bring and release.

4 J. Releases by the State of Indiana. The Indiana Attorney General

5 and the Indiana Securities Commissioner fully and finally release the Released Entities

6 from any civil claim that the Indiana Attorney General or the Indiana Securities

7 Commissioner acting with the assistance of the Indiana Attorney General brought or

8 could have brought based on: (a) the facts alleged in his Complaint dated June 27, 2013,

9 filed in Marion Superior Court 3, Marion County, Indiana under Cause No. 49D03

10 1306-PL-025757 (the "Indiana State Case"), for the period from January 1, 2001 through

11 June 27, 2013; or (b) the Covered Conduct for the period of January 1, 2001 through

12 December 31, 2012. This release includes any claim the Indiana Attorney General could

13 have brought under Indiana's Deceptive Consumer Sales Act, Indiana Code chapter 24

14 5-0.5. The Indiana Attorney General and the Indiana Securities Commissioner execute

15 this release in their official capacities and release only claims that the Indiana Attorney

16 General or the Indiana Securities Commissioner acting with the assistance of the Indiana

17 Attorney General have the authority to bring and release.

18 k. Releases by the State of Iowa. The Iowa Attorney General fully and

19 finally releases the Released Entities from any civil claim that was or could have been

20 brought based on: (a) the facts alleged in his Petition in Equity filed February 5, 2013 in

21 the Iowa District Court for Polk County, docket no. EQCE073545 ("Iowa's State Case"),

22 for the period of January 1, 2001 through February 5, 2013; or (b) the Covered Conduct

23 for the period of January 1, 2001 through December 31, 2012. The Iowa Attorney

24 General executes this release in his official capacity and releases only claims that the

25 Iowa Attorney General has the authority to bring and release.

26 1. Releases by the State of Maine. The Maine Attorney General fully

27 and finally releases the Released Entities from any civil claim that was or could have

28 been brought based on: (a) the facts alleged in her Complaint dated February 5, 2013,

1 Court case no. BCD-CV-14-49 ("Maine's State Case"), for the period of January 1, 2001

2 through February 5, 2013; or (b) the Covered Conduct for the period of January 1, 2001

3 through December 31, 2012. The Maine Attorney General executes this release in her

4 official capacity and releases only claims that the Maine Attorney General has the

5 authority to bring and release.

6 m. Releases by the State of Mississippi. The Mississippi Attorney

7 General fully and finally releases the Released Entities from any civil claim that was or

8 could have been brought based on: (a) the facts alleged in the Complaint dated May 10,

9 2011, the Amended Complaint dated September 8, 2011, or the Second Amended

10 Complaint dated July 2, 2014, Hinds County Chancery Court Case No. 02011-835 S/2

11 ("Mississippi's State Case"), for the period of January 1, 2000 through July 2, 2014; or

12 (b) the Covered Conduct for the period of January 1, 2001 through December 31, 2012.

13 The Mississippi Attorney General executes this release in his official capacity and

14 releases only claims that the Mississippi Attorney General has the authority to bring and

15 release.

16 n. Releases by the State of Missouri. The Missouri Attorney General

17 and Missouri Commissioner of Securities fully and finally release the Released Entities

18 from any civil claim that was or could have been brought based on: (a) the facts alleged

19 in the Petition dated February 5, 2013, State of Missouri ex rel Chris Koster, Attorney

20 General, ex rel The Commissioner of Securities v. The McGraw Hill Companies, Inc.

21 and Standard and Poor's Financial Services, LLC, Circuit Court of Jackson County at

22 Kansas City, Case No. 1316-cv02931 ("Missouri's State Case"), for the period of

23 January 1, 2001 through February 5, 2013; or (b) the Covered Conduct for the period of

24 January 1, 2001 through December 31, 2012. The Missouri Attorney General and

25 Commissioner of Securities execute this release in their official capacities and release

26 only claims that the Missouri Attorney General or the Commissioner of Securities have

27 the authority to bring and release.

1 o. Release by the State of New Jersey, Office of the Attorney

2 General. John J. Hoffman, Acting Attorney General of the State ofNew Jersey (the

3 "Attorney General"), and Steve C. Lee, Acting Director of the New Jersey Division of

4 Consumer Affairs (the "Director"), fully and finally release the Released Entities from

5 any civil claim that the Attorney General and the Director brought or could have brought

6 against Defendants based on: (a) the facts alleged in their Complaint dated October 9,

7 2013, Superior Court ofNew Jersey, Chancery Division, General Equity: Essex County,

8 Docket No. ESX-C-216-13 ("New Jersey's State Case"), for the period of January 1,

9 2001 through October 9, 2013; or (b) the Covered Conduct for the period of January 1,

10 2001 through December 31, 2012. The Attorney General and the Director execute this

11 release in their official capacities and release only claims that the State ofNew Jersey,

12 Office of the Attorney General or the Director have the authority to bring and release.

13 p. Releases by the State of North Carolina. The North Carolina

14 Attorney General fully and finally releases the Released Entities from any civil claim

15 that was or could have been brought based on: (a) the facts alleged in his Complaint

16 dated February 5, 2013, or his Amended Complaint dated July 11, 2014, currently in

17 Wake County Superior Court, docket number 13 CVS 1703 ("North Carolina's State

18 Case"), for the period of January 1, 2001 through July 11, 2014; or (b) the Covered

19 Conduct for the period of January 1, 2001 through December 31, 2012. The North

20 Carolina Attorney General executes this release in his official capacity and releases only

21 claims that the North Carolina Attorney General has the authority to bring and release on

22 behalf of the State of North Carolina.

23 q. Releases by the Commonwealth of Pennsylvania, Office of

24 Attorney General. The Pennsylvania Attorney General fully and finally releases the

25 Released Entities from any civil claim that was or could have been brought based on: (a)

26 the facts alleged in her Complaint dated February 5, 2013, or in her Amended Complaint

27 dated August 11, 2014, Commonwealth Court No. 58 MD 2013 ("Commonwealth Court

28 Action"), for the period of January 1, 2001 through August 11, 2014; or (b) the Covered

1 Conduct for the period of January 1, 2001 through December 31, 2012. The

2 Pennsylvania Attorney General executes this release in her official capacity and releases

3 only claims that the Pennsylvania Attorney General has the authority to bring and

4 release.

5 r. Releases by the State of South Carolina. The South Carolina

6 Attorney General fully and finally releases the Released Entities from any civil claim

7 that was or could have been brought based on: (a) the facts alleged in his Complaint

8 dated February 13, 2013, State ofSouth Carolina ex rel. Alan Wilson, in his official

9 capacity as Attorney General and as Securities Commissioner for the State ofSouth

10 Carolina v. The McGraw-Hill Companies, Inc., and Standard & Poor 's Financial

11 Services LLC, filed in the Richland County Court of Common Pleas in the State of South

12 Carolina, Civil Action no. 2013-CP-40-00951 ("South Carolina's State Case"), for the

13 period of January 1, 2001 through February 13, 2013; or (b) the Covered Conduct for the

14 period of January 1, 2001 through December 31, 2012. The South Carolina Attorney

15 General executes this release in his official capacity and releases only claims that the

16 South Carolina Attorney General has the authority to bring and release.

17 s. Releases by the State of Tennessee. The Tennessee Attorney

18 General fully and finally releases the Released Entities from any civil claim that was or

19 could have been brought based on: (a) the facts alleged in his Complaint dated February

20 5, 2013, Davidson County Circuit Court case no. 13C506 ("Tennessee's State Case"),

21 for the period of January 1, 2001 through February 5, 2013; or (b) the Covered Conduct

22 for the period of January 1, 2001 through December 31, 2012. The Tennessee Attorney

23 General executes this release in his official capacity and releases only claims that the

24 Tennessee Attorney General has the authority to bring and release.

25 t. Releases by the State of Washington. The Washington Attorney

26 General fully and finally releases the Released Entities from any civil claim that was or

27 could have been brought based on: (a) the facts alleged in his Complaint dated February

28 5, 2013, or his Amended Complaint dated August 1, 2014, State of Washington v. The

1 McGraw-Hill Companies, Inc. and Standard & Poor 's Financial Services LLC, Case

2 No. 13-2-02593-9 in the Snohomish County Superior Court ("Washington's State

3 Case"), for the period of January 1, 2001 through August 1, 2014; or (b) the Covered

4 Conduct for the period of January 1, 2001 through December 31, 2012. The Washington

5 Attorney General executes this release in his official capacity and releases only claims

6 that the Washington Attorney General has the authority to bring and release.

7 12. Excluded Claims. Notwithstanding the releases in Paragraphs 10 and 11 of

8 this Agreement, or any other term(s) of this Agreement, the following claims are

9 specifically reserved and not released by this Agreement:

10 a. Any criminal liability;

11 b. Any antitrust liability, except, with respect to the States, to the extent

12 any of the States have alleged practices by Defendants that purportedly violate State

13 antitrust laws;

14 C. Any liability of any individual;

15 d. Any private right of action;

16 e. Any liability of any person or entity other than the Released Entities;

17 f. Any liability arising under Title 26 of the United States Code (the

18 Internal Revenue Code) or the States' similar tax codes or laws;

19 g. Any liability to or claims of the Federal Deposit Insurance

20 Corporation (in its capacity as a corporation, receiver, or conservator), National Credit

21 Union Administration (in its capacity as a corporation, receiver, or conservator), Federal

22 Housing Finance Agency, any of the Federal Home Loan Banks, the Federal Reserve

23 Board and its member institutions, the Securities & Exchange Commission ("SEC"), the

24 Federal Trade Commission, and the United States Department of the Treasury;

25 h. Except as explicitly stated in this Agreement, any administrative

26 liability, including the suspension and debarment rights of any federal or state agency;

27 1. Any liability to or claims of the United States (or its agencies) or the

28 States ( or their agencies) for any conduct other than that falling within the scope of the

1 respective releases granted by the United States and the States in Paragraphs 10 and 11

2 of this Agreement;

3 J. Any liability to or claims of the United States ( or its agencies or any

4 other party) as to which the United States Attorney General lacks the authority to bring

5 or compromise;

6 k. Any liability to or claims of the States (or their agencies or any other

7 party) as to which the respective Attorneys General of the States, or for Missouri the

8 Missouri Commissioner of Securities, for Indiana the Securities Commissioner for

9 Indiana, and for New Jersey the Director of the New Jersey Division of Consumer

10 Affairs, lack the authority to bring or compromise;

11 1. Any liability to or claims of county, municipal, or local pension funds

12 or other county, municipal, or local government funds as investors, unless otherwise

13 explicitly released by an individual State in this Agreement;

14 m. Any liability to or claims of county or local governments or state

15 regulatory agencies having specific regulatory jurisdiction that is separate and

16 independent from the regulatory and enforcement jurisdiction of the State Attorney

17 Generals, or for Missouri the Missouri Commissioner of Securities, for Indiana the

18 Securities Commissioner for Indiana, and for New Jersey the Director of the New Jersey

19 Division of Consumer Affairs; and

20 n. Any liability based upon obligations created by this Agreement.

21 13. Releases by Defendants. The Released Entities fully and finally release

22 the United States and the States, and their officers, agents, employees, and servants, from

23 any claims (including attorneys' fees, costs, and expenses of every kind and however

24 denominated) that the Released Entities have asserted, could have asserted, or may assert

25 in the future against the United States and the States, and their agencies, divisions,

26 entities, officers, agents, employees, and servants, related to the conduct falling within

27 the scope of the releases granted by the United States and the States in Paragraphs 10

1 and 11 of this Agreement and the investigation and prosecution thereof by the United

2 States and the States.

3 14. Waiver of Potential Defenses by Defendants. The Released Entities

4 waive and shall not assert any defenses the Released Entities may have to any criminal

5 prosecution or administrative action relating to the conduct falling within the scope of

6 the releases granted by the United States and the States in Paragraphs 10 and 11 of this

7 Agreement that may be based in whole or in part on a contention that, under the Double

8 Jeopardy Clause in the Fifth Amendment of the Constitution, or under the Excessive

9 Fines Clause in the Eighth Amendment of the Constitution and the States' similar state

10 constitutional provisions, this Agreement bars a remedy sought in such criminal

11 prosecution or administrative action.

12 15. U nallowa ble Costs. U nallowable Costs ( as defined in this paragraph

13 below) will be separately determined and accounted for by Defendants, and Defendants

14 shall not charge such Unallowable Costs directly or indirectly to any contract with the

15 United States or the States. For purposes of this paragraph, "Unallowable Costs" means

16 unallowable costs for government contracting purposes, which shall specifically include

17 all costs (as defined in the Federal Acquisition Regulation, 48 C.F.R. § 31.205-47)

18 incurred by or on behalf of Defendants, and its present or former officers, directors,

19 employees, shareholders, and agents in connection with any of the following:

20 a. the matters covered by this Agreement;

21 b. the United States' and the States' audit(s) and civil investigation(s) of

22 the matters covered by this Agreement;

23 c. Defendants' investigation, defense, and corrective actions undertaken

24 in response to the United States' and the States' audit(s) and civil investigation(s) in

25 connection with the matters covered by this Agreement (including attorneys' fees);

26 d. the negotiation and performance of this Agreement; and

27 e. the payments Defendants make to the United States and the States

28 pursuant to this Agreement.

1 16. Miscellaneous Provisions.

2 a. This Agreement is intended to be for the benefit of the Parties only

3 and does not create any third-party rights.

4 b. The Parties acknowledge that this Agreement is made without any

5 trial or final adjudication on the merits, and is not itself a final order of any court or

6 governmental authority.

7 c. Each Party shall bear its own legal and other costs incurred in

8 connection with this matter, including in connection with the US Case, the State Cases,

9 the investigations leading to the US Case and the State Cases, and the preparation and

10 performance of this Agreement.

11 d. Each Party and signatory to this Agreement represents that it freely

12 and voluntarily enters in to this Agreement without any degree of duress or compulsion.

13 e. Nothing in this Agreement in any way alters or affects the terms of

14 any regulations put in place by the SEC with respect to Nationally Recognized Statistical

15 Rating Organizations ("NRSROs") or Defendants' obligations under any such

16 regulations.

17 f. Nothing in this Agreement constitutes an agreement by the United

18 States or the States concerning the characterization of the Settlement Amount for the

19 purposes of the Internal Revenue laws, Title 26 of the United States Code, or similar

20 state tax codes or laws.

21 g. For the purposes of construing the Agreement, this Agreement shall

22 be deemed to have been drafted by all Parties and shall not, therefore, be construed

23 against any Party for that reason in any dispute.

24 h. This Agreement constitutes the complete agreement between the

25 Parties. This Agreement may not be amended except by written consent of all the

26 Parties.

1 I. The undersigned counsel for the United States and the States

2 represent and warrant that they are fully authorized to execute this Agreement on behalf

3 of the United States and the States.

4 J. Counsel for Defendants shall provide a corporate resolution

5 authorizing the execution of this Agreement on behalf of Defendants, and represent and

6 warrant that they are fully authorized to execute this Agreement on behalf of Defendants.

7 k. This Agreement may be executed in counterparts, each of which

8 constitutes an original and all of which constitute one and the same Agreement.

9 1. This Agreement is binding on Defendants' successors, transferees,

10 heirs, and assigns.

11 m. All Parties consent to the disclosure to the public of this Agreement

12 by Defendants, the United States, and the States.

13 n. This Agreement shall not be deemed to constitute approval of any of

14 Defendants' advertising or business practices, and neither Defendants nor anyone acting

15 on their behalf shall state or imply that this Agreement constitutes approval, sanction, or

16 authorization for any act or practice of Defendants.

17 o. This Agreement is effective on the date of signature of the last

18 signatory to the Agreement. Facsimiles of signatures and signatures provided by

19 portable document format (".pdf') shall constitute acceptable, binding signatures for

20 purposes of this Agreement.

l For Defendants McGraw Hill Financial, lnc., and

2 Standard & Poor's Financial Services, LLC:

~\;6

1J Y A 0

Executive Vice President & General Counsel

7 McGraw Hill Financial, Inc.

55 Water Street

New York, NY 10041

Dated: ~ · ~

)

ADAM SCHUMAN

15 Executive Managing Director & Chief Legal Officer

Standard & Poor's Financial Services LLC

55 Water Street

17 New York. NY 10041

19 Dated:

For the United States:

ES.CARDONA

5 Assistant United States Attorney

6 United States Attorney's Office

7 Central District of California

312 North Spring Street, 1th Floor

Los Angeles, CA 90012

Dated: 'J/J-/30t 5

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/' /

13 /

,, ~-,,

/ ../ / ~

, ',·.

< JAM E EL N

Trial Attorney

United States Department of Justice

Civil Division, Consumer Protection Branch

18 P.O. Box 261, Ben Frank.Jin Station

Washington. D.C. 20044

Dated: ;:./ '. / __ L 1 1.. c

21 7 I

For the State of Arizona:

MARK BRNOVICH

ATTORNEY GENERAL FOR THE STATE OF ARIZONA

Brad K. Keogh

Susan V. Myers

Dana R. Vogel

Assistant Attorneys General

Consumer Protection & Advocacy Section

Arizona Attorney General's Office

1275 West Washington Street

Phoenix, Arizona 85007

l For the State of Arkansas:

4 By: K ~ J WELLS, Ark. Bar No. 2 07213

5 · istnnl Attorney General

LESLIE RUTLEDGE

7 Arkansas Attorney General

323 Center Street, Suite 500

Little Rock, AR 7220 I

11 Dated: February 2, 2015

For the State of California:

/\ . !J\L/\D. HA I~

Ca 1 'ornia Attorney General

California Department of Justice

455 Golden Gate, Suite 11000

San Franciscot CA 94102

Dated: ;i.. ~ ;;;!{)Ir

For the State of Colorado, ex rel

CYNTHIA H. COFFMAN, Attorney General:

(

5 J, '

I . IA_J) ftf//W,g

IP·f MINEl{DEJ'll ML· llS

/\. sist:1111 Attorney General

Consumer Protection Section

7 Colorado Department of Law

8 R,ii ph L. 'arr .o I r, Jo Judicial Center

9 1300 Broadway 71h Flo r

Denver, CO 80203

Dated: J J I5

1 For the State of Connecticut:

3 GEORGE JEPSEN

ATTORNEY GENERAL

By:

PERRY ZINN ROWTHORN

Deputy Attorney General

----

5 5 Elm Street

Hartford, CT 06141

11 Dated: ~~/'2-//2 "' r .J

I For the State of Delaware

Ait«--- --

MATIHEWP.DENN

S Attorney General for the State of Delaware

Delaware Department of Justice

Carvel State Office Building

7 820 N. French Street

Wilmington, DE 1980 I

IO Dated: ;}..J.z.J_ co I fr _

For the District of Columbia:

Attorney General for the District of Columbia

441 Fourth Street, NW

Washington, D.C. 20001

Dated: J- ~ - J '.;

For the State ofldaho:

LAWRENCE G. WASDEN

3 AlTORNEY GENERAL FOR THE STATE OF IDAHO

By:

~ Pt. u-f~-{' {__ - ,

Brett T. Delange )

Consumer Protection Division Chief

Oscar S. Klaas

Jane E. Hochberg

11 Scott Zanzig

Deputy Attorneys General

13 Consumer Protection Division

954 West Jefferson, 2d Floor

Boise, ID 83720

17 Dated: Z.. / Z- / 2-o/ .5

For the State of Illinois:

: ~N

5 Attorney General State of 11 linois

100 West Randolph Street, 12th Floor

Chicago, IL 60601

9 Dated: J(/J_ 21

~1;6'

For the State oflndiana:

~ ~ .~;/

( ~ Z Y F. ~ L 'R

5 Allor;{cy Gcnernl for the State of Indiana

Indiana Attorney General's Office

Indiana Government Center South

7 302 West Washington Street, 5th Floor

Indianapolis, IN 46204

Datcd:1L, ';k,15

(L,/(!M-i:L -

CAROi. MIHALIK

Securities Commissioner for Indiana

J5 Secretary of State Connie Lawson

302 West Washington Street, Room El 11

Indianapolis, IN 46204

I Dated: February 2, 2015

For the State of Iowa:

.·~

MILLER

5 Attorney eneral for the State of Iowa

Jowa e artment of Ju l ice

6 Hoover Building, 2"11 Floor

7 Des Moines, Iowa 50319

fi4, JA.g,, r 2. \ 2o t.S

l O Dated:

For the State of Maine:

ATTORNEY GENERAL

JANETT. MILLS

Linda Conti

;Is

Assistant Attomey General

Chief, Consumer Protection Division

Office of the Attorney General

6 State House Station

Augusta, Maine 04333

Dated: February 2, 2015

~ ! ~~:;Mli_ tPa~

aet'

sro /~6,e w. r1A-!'

/f: )1,/

;,r'--

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;<);-y ~ ~-n~

,l{i'f/f_r,<Hf J"rz> /f?"°""

JIMHOOD

5 Attorney General for the State of Mississippi

Office ofth~ Mississippi Attorney General

P.O. Box 22·0.

. 7 Jackson, lylississippi 39205

Dated:

For the: State of Missouri:

4 CHRIS KOSTER

Mi!)S()Uri Anomey General

Supreme Court Building

6 207 Wesl High Street

7 Jefferson, MO 65 l02

Dated: feb,uo., y c2 .~kf

JO I

Andrew M. Hartnett, Mo. Bar No. 60034

15 Commissioner of Securities

600 West Main Street

]6 Jefferson City, Missouri 6510 I

Telephone: (573) 751-4136

17 Facsimile: (573) 526-3124

20 Dated: February 2. 2015

For the State of New Jersey:

5 . JOHf\: J. HOFFMAN

6 ACTING ATJ'ORNEY GFNERAI. OF '.\JEW JERSEY

Otlicc of the Attorney General

Richard J. Hughes Justice Complex

8 8 111 Floor, West \Ving

25 Market Street

Trenton, New Jersey 08625

Dated: 1:ehruary 2, 2015

(.d--c(L_'_

STEVE C. LEE

ACTING DIRECTOR

I7 Ne\V Jt-rscy Division ol'Cm1sumer /\f'l'airs

I 24 I la lsey Street, Seventh Floor

Newark, New Jersey 0710 I

Dated: February 2, 20 15

1 For the State of North Carolina:

: t4Z ~

ROY. COOPER

5 Attorney General for the State of North Carolina

North Carolina Department of Justice

P.O. Box 629 ·

7 Raleigh, NC 27602

Dated:__d_!:!ldo/5

15 ·

1 For the Commonwealth of Pennsylvania:

KATHLEEN G. KANE

3 ATTORNEY GENERAL

. / ~ · II

6 By: , ?Ji!!I/;/(

¥tA

lL f'.

(/(

7 hiefl) puly Attorney General

14th Floor, Strawberry Square

Harrisburg, PA 17120

IO Dated: 2 } 2 } ) ,S::

i1 7 I

For the State of South Carolina:

~w·~

ALAN WILSON

5 Attorney General and Securities Commissioner

for the State of South Carolina

Office of the Attorney General

7 P.O. Box 11549

Columbia, SC 29211

lO Dated: ~ /tJ.. f I 5

lI I

1 For the State of Tennessee:

5 Attorney General and Reporter

for the State of Tennessee

6 Office of the Tennessee Attorney General

7 425 5th Avenue North

Nash vi Ile, TN 37202

IO Dated: February 2, 2015

1 For the State of Washington:

ROBERT W. FERGUSON

Attorney General

By:

9 SHANNON E. SMITH

lO BENJAMIN J. ROESCH

Assistant Attorneys General

11 Washington ·Attorney General's Office

Consumer Protection Division

800 5th Ave., Ste 2000

13 Seattle, WA 98104-3188

Dated: 7-/ '2.../ WIS-

13 Annex 1

Annex 1: Statement of Facts

1. Between 2004 and 2007, Standard & Poor's Ratings Services ("S&P"), at the time

a division of The McGraw-Hill Companies, Inc. (now known as McGraw Hill Financial, Inc.),

was a Nationally Recognized Statistical Rating Organization ("NRSRO") that, for a fee,

provided letter grade ratings of, among other things, Residential Mortgage Backed Securities

("RMBS") and Collateralized Debt Obligations ("CDOs"). S&P made statements regarding its

processes and controls for the development of criteria for, and the issuance and surveillance of,

RMBS and COO ratings in publicly available documents that included a formal Code of

Practices and Procedures (the "Code") first published in September 2004 and subsequently

revised and reissued in October 2005 and June 2007.

The Code

2. In September 2004, S&P first published the Code. The Introduction to the Code

stated that S&P's mission had "always remained the same - to provide high-quality, objective,

independent, and rigorous analytical information to the marketplace." The Introduction stated

that S&P "endeavors to conduct the rating and surveillance processes in a manner that is

transparent and credible and that also ensures that the integrity and independence of the rating

and surveillance processes are not compromised by conflicts of interest, abuse of confidential

information or other undue influences." The Introduction stated that S&P had "established and

implemented internal controls and policies and procedures to further the transparent, credible,

independent and objective nature of its rating and surveillance processes." The Introduction

identified the Code as a "restatement of established policies and procedures" relevant to "these

rating and surveillance processes." With respect to "independence and avoidance of conflicts of

interest," Section 3 .1.1 of the Code stated that S&P "endeavors to avoid conflicts of interest and,

where this is not possible, has established policies and procedures to address the conflicts of

interest through a combination of internal controls and disclosure." Section 3 .1.2 of the Code

stated: "In all analytic processes, Ratings Services must preserve the objectivity, integrity and

independence of its ratings. In particular, the fact that Ratings Services receives a fee from the

issuer must not be a factor in the decision to rate an issuer or in the analysis and the rating

opinion." Section 3.1.5 of the Code stated: "Ratings assigned by Ratings Services shall not be

affected by an existing or a potential business relationship between Ratings Services (or any

Non-Ratings Business) and the issuer or any other party, or the non-existence of such a

relationship." In October 2005 and June 2007, S&P published updated versions of the Code that

made similar statements regarding the objectivity, integrity, and independence of S&P's ratings

process.

3. S&P published on its website a November 2005 "Analytic Firewalls Policy" that

stated, among other things: "No employee of Standard & Poor' s/McGraw-Hill shall attempt to

exert improper influence on the opinions of an Equity Analyst or a Ratings Analyst. In no

circumstances shall an employee of Standard & Poor's/McGraw-Hill try to influence the opinion

of an Equity Analyst or a Ratings Analyst by referring to the commercial relationship between

Standard & Poor's/McGraw-Hill and any third party." In a February 2006 "Report On

Implementation of Standard & Poor' s Rating Services Code of Conduct," also published on

S&P's website, S&P stated, among other things: (a) "[S&P] recognizes its role in the global

Annex I : Statement of Facts

Page I

capital markets and is committed to providing ratings that are objective, independent and

credible"; and (b) "It is a central tenet of [S&P] that its ratings decisions not be influenced by the

fact that [S&P] receives fees from issuers. To reinforce this central tenet, commencing in 2004,

[S&P] separated in a more formal manner its commercial functions from its rating analytical

functions."

Decisions Regarding CDO Evaluator Updates

4. In 2004 and 2005, S&P was in the process of updating COO Evaluator, one of the

models used by S&P to rate Collateralized Debt Obligations ("CDOs") to arrive at what would

become COO Evaluator Version 3.0 ("E3"). The initial update efforts, throughout 2004, were

directed in part by the then head of S&P' s Global COO group, whose experience was that the

risk of losing transaction revenue was a factor that affected updates of COO Evaluator. He set as

goals for the update efforts: (a) small impacts to non-investment grade ("NIG'') cash COO deals

to minimize any negative impact of the updates on this segment of S&P's ratings business; and

(b) 2-3 notch improvements for investment grade deals to improve S&P's market share with

respect to investment grade synthetic CDOs. In accordance with these goals, during the initial

update efforts, he and, according to him the then Managing Director in charge of the Cash COO

group, pushed back against updates to COO Evaluator proposed by one of S&P's senior analysts

because they believed these changes would have had a significant negative effect on S&P's

market share and ratings business. In accordance with these goals, on May 27, 2004, the then

head of S&P's Global COO Group sent the head of S&P's Research and Criteria Group, the

Managing Director in charge of the Synthetic COO Group, and others an email directing the

COO Group to begin testing with customers a default matrix he had developed. According to the

then head of S&P's Global COO Group, the decision to test this default matrix was "in part

based upon business decisions, considerations." Ultimately, this default matrix was not adopted,

and work on updating COO Evaluator to arrive at what would become E3 continued.

5. S&P originally scheduled E3 for release "sometime after July 11, 2005." In

preparation for the release, S&P circulated information regarding E3 to a number of investment

banks involved in the issuance ofCDOs. On July 18 and 19, 2005, a Client Value Manager in

S&P's Global COO Group sent emails summarizing the feedback on E3 that had been received

from one of these investment banks as follows: S&P's ratings generated using COO Evaluator

Version 2.4.3 had been the "best" (by comparison to Moody's and Fitch) with respect to CDOs

comprised of certain "more lowly rated" asset pools; S&P would be giving up its market

advantage with respect to these CDOs by moving to E3; and S&P would not make up for this

with any increase in business in "the high quality sector" because with respect to this sector

"Moody's and Fitch can do better than E3 already." After receiving this negative feedback, in a

July 20, 2005 "Global COO Activity Report" that she sent to the Executive Managing Director in

charge of S&P's Structured Finance department, the Managing Director in charge of S&P's

Global COO group stated that the roll out of E3 to the market had been "toned down and slowed

down" "pending further measures to deal with such negative results," and described the basis for

this decision, noting in particular one investment bank's comments that E3 would result in S&P

missing "potential business opportunities."

Annex I : Statement of Facts

Page 2

Decisions Regarding Negative RMBS Ratings Actions

6. On or about November 14, 2006, the head of S&P's RMBS Surveillance Group

sent to two S&P executives and an S&P senior analyst an email attaching a spreadsheet, titled

"Subprime_Trouble.XLS," which showed that more than 50% of the subprime RMBS

transactions that S&P rated in 2006 had severely delinquent loans that represented 25% or more

of credit enhancement for the lowest rated class, with many having realized losses already.

7. On or about January 11, 2007, the head of S&P's RMBS Surveillance Group

conducted a meeting of that group. Minutes indicate that at the meeting the RMBS Surveillance

Group discussed topics including that a "Housing Bubble" existed, that there was a "slowdown,"

that the "Bubble is deflating," a projection for "20% default this year," that there were "issues

with Subprime, some AltA," and that RMBS rated "A and below are in trouble for 80% of the

deals." Minutes indicate that the RMBS Surveillance Group considered a recommendation that

2006 RMBS subprime be handled as follows: "Identify all the worst pools for 2006 (Decide a

cutoff for delinquencies 20-30%) and put all on creditwatch."

8. After this meeting, on February 7, 2007, an RMBS Surveillance Review meeting

was conducted. At this meeting, RMBS Surveillance staff recommended that subordinate

tranches from approximately 30 RMBS transactions be placed on CreditWatch Negative, a

public announcement, and that subordinate tranches from approximately 20 additional RMBS

transactions be placed on Internal Watch, which was S&P's internal, non-public list of securities

to be closely reviewed for possible rating action. The agenda for this meeting indicated that the

recommendations for Credit Watch were made because tranches were experiencing "higher than

expected delinquency and loss performance," "[s]everely delinquent percentages are increasing

[at] a rapid pace," "[l]osses are occurring very early in some of the deals," "[s]everely delinquent

ratio to loss coverage exceeds 50%," and "[m]odified stress shows potential default with in[sic] 7

months." The agenda for the meeting indicated that RMBS Surveillance proposed "continuous

monitoring of the entire list of 2006 transactions through our monthly exception reports and

SFSS portfolio" with rating actions to be taken based on the criteria described in the agenda after

the "impact of rating actions to the SF business" was "discussed and understood."

9. The February 7, 2007 recommendations of the RMBS Surveillance Group were

not followed. Instead, a committee that included members of S&P's RMBS New Issue group

was convened on February 12 2007, and that committee decided to place only 18 RMBS

tranches from 11 RMBS transactions on CreditWatch negative. Immediately after this decision,

the head of S&P's RMBS Surveillance Group wrote to the Managing Director in charge of the

Global Surveillance/Servicer Evaluations Group that she was "fine with where we are."

According to several of her colleagues, however, the head of S&P's RMBS Surveillance Group

regularly complained that she was prevented by S&P executives from downgrading subprime

RMBS as she and the surveillance group wanted because of concern that S&P's rating business

would be negatively affected if S&P were to announce severe downgrades. According to the

Managing Director in charge of the Global Surveillance/ Servicer Evaluations Group, he was

told at the time by the head of S&P's Research and Criteria Group that a decision to make only

"incremental downgrades" was made outside S&P's analytical rating function by the Executive

Managing Director in charge of S&P's Structured Finance department.

Annex I : Statement of Facts

Page 3

10. On or about June 11, 2007, the heads of S&P's RMBS and COO Surveillance

Groups sentto senior S&P executives an "RMBS & COO Surveillance Weekly Subprime

Update." With respect to RMBS Surveillance, the Executive Summary portion of this update

noted that "delinquencies and losses continued to increase in the pools," "the dollar balance of

loans in foreclosure and REO continues to increase," "[r]esearch to determine the current time

required to liquidate the loans has been initiated," and "[w]e expect to obtain data necessary to

adjust our severity assumptions and the anticipated timing of losses, both of which may

negatively impact rating performance." The update also detailed the determination that certain

tranches of subprime RMBS were particularly vulnerable to rating actions, noting that analysts

had re-run all of S&P's 18,000 subprime RMBS ratings issued since 1996 and found that, on

average, the BBB-rated and lower rated tranches of subprime RMBS had greater than 100%

severe delinquencies versus available credit support.

11. On or about June 27, 2007, senior S&P managers circulated an email from an

S&P senior analyst indicating that if, as expected, the 2006 vintage RMBS continued to perform

worse than the 2000 vintage RMBS, "we could see losses over 25% of original balance." The

head of the RMBS Surveillance Group forwarded this email to others within RMBS surveillance

with the comment that if the senior analyst was correct, we "could see defaults at' AA' and

'AAA."'

12. On or about June 29, 2007, S&P decided to accelerate the process to revise

surveillance criteria with the expectation that this would result in large-scale negative rating

actions on subprime RMBS ratings. Reflecting this decision: (a) on June 29, 2007, the Managing

Director in charge of the Global ABS/RMBS/New Assets Group sent an email to an executive in

her group explaining: "We have shortened the dates to act .... [A]bsent any adverse event that

may require u act ing sooner than that, such timings tentatively include a CW [ red itWatch]

press rel ease on Monday Jul y 91h"; and (b) on Jul y 1, 2007, the head of the Research and Criteria

Group forwarded to the head of the COO Group and a group of other S&P executives a

spreadsheet identifying 428 subprime RMBS transactions to be reviewed, with an accompanying

email stating: "We have estimated the potential losses we expect from the 2006 vintage as a basis

for taking near term rating action that will truly reflect the appropriate rating levels" and noting

that in the future the review would need to extend to "closed end seconds" and "Alt-A"

transactions.

13. On July 10, 2007, S&P publicly announced the placement of"credit ratings on

612 classes of [RMBS] backed by U.S. Subprime collateral on CreditWatch with negative

implications." In addition, S&P publicly announced changes to its new issue and surveillance

criteria with respect to subprime RMBS, including toughening of loss severity and loss timing

assumptions for purposes of surveillance, and increased credit enhancement requirements for

new subprime transactions. Thereafter, on July 12, 2007, S&P announced large-scale

downgrades of 2005 and 2006 vintage subprime RMBS ratings.

14. As referenced above, from February 7, 2007 through June 29, 2007, reports from

S&P analysts indicated that negative rating actions on large numbers of subprime RMBS were

anticipated. After S&P's June 29, 2007 decision to accelerate the revision of surveillance criteria

for subprime RMBS, senior managers at S&P expected that this would result in large-scale

Annex l: Statement of Facts

Page 4

negative rating actions on subprime RMBS. Throughout the period from February 7, 2007

through the public announcement of the negative rating actions on July 10, 2007, S&P continued

to issue and confirm ratings for CDOs backed substantially by subprime RMBS, without making

any adjustments to its existing CDO rating criteria to account for anticipated negative rating

actions.

This Settlement

15. On August 27, 2014, the United States Securities and Exchange Commission

adopted new requirements for credit rating agencies registered with the Commission as

NRSROs. These new requirements address conflicts of interest and procedures to protect the

integrity and transparency of rating methodologies, and provide for attestations to accompany

credit ratings that the ratings were not influenced by other business activities. As a material part

of this settlement, S&P agrees to certain Compliance Measures requiring compliance with

Particular State Laws as set forth in the Settlement Agreement.

16. S&P has reviewed the voluminous discovery provided to S&P by the United

States to date, and acknowledges that this discovery does not support its allegation that the

United States' FIRREA complaint against S&P was filed in retaliation for S&P's 2011 decisions

to place on credit watch negative and subsequently downgrade the credit rating of the United

States. Accordingly, in conjunction with this settlement, S&P is withdrawing that allegation.

Annex I: Statement of Facts

Page 5

13 Annex 2

1 KEKER & VAN NEST LLP

JOHN KEKER (SBN 49092)

2 jJ<eker@,kvn.com

ELLI01 R. PETERS (SBN 158708)

3 epeters@.kvn.com

633 Baife1y Street

4 San Franc1sco, CA 94111-1809

Telephone: 415 391 5400

5 Facsimile: 415 397 7188

6 Attorn~ys for Defendants MCGR.A W-HILL COMPANIES, INC., and

STANDARD & POOR S FINANCIAL SERVICES LLC

STEPHANIE YONEKURA

8 Acting United States Attorney

GEORGES. CARDONA (CA Bar No. 135439)

ANOIEL KHORSHID (CA Bar No. 223912)

10 Assistant United States Attorneys

Room 7516 Federal Building

11 300 N. Los Angeles St.

Los Angeles, California 90012

12 Telephone: (213) 894-8323/6086

13 Facsimile: (213) 894-6269/7819

Email: George.S.Cardona@usdoj.gov I Anoiel.Khorshid@usdoj.gov

Attorneys for Plaintiff UNITED STATES OF AMERICA

(Additional counsel on next page)

17 UNITED STATES DISTRICT COURT

18 CENTRAL DISTRICT OF CALIFORNIA

19 SOUTHERN DIVISION

20 UNITED STATES OF AMERICA, Case No. CV13-779 DOC (JCGx)

21 Plaintiff, JOINT STIPULATON FOR

DISMISSAL OF ACTION

22 v. PURSUANT TO FEDERAL RULE OF

CIVIL PROCDEDURE 41(a)(l)(A)(ii)

23 MCGRAW-HILL COMPANIES, INC.

and STANDARD & POOR'S

24 FINANCIAL SERVICES LLC,

25 Defendants.

JOINT STIPULATION FOR DISMISSAL OF ACTION

CASE NO. CV13-779 DOC (JCGx)

(Additional counsel):

2 CAHILL GORDON & REINDEL LLP

~LOYD ABR_AMS (pro hac vice)

3 fabrams(a2cahill.com

S. PENNY WINDLE (pro hac vice)

4 pwindle(a2cahill.com

·so Pine Street

5 New York, New York 10005-1702

Telephone: 212 701 3000

6 Facsimile: 212 269 5420

7 KELLER RACKAUCKAS LLP

JENNIFER L. KELLER (SBN 84412)

8 jkeller(a),krlawllp.com

18300 ~on Karman Avenue, Suite 930

9 Irvine CA 92612

Telephone: 949 476 8700

10 Facsimile: 949 476 0900

11 Attorneys for Defendants MCGRAW-HILL COMPANIES, INC., and

STANDARD & POOR' S FINANCIAL SERVICES LLC

13 JOYCE BRANDA

Acting Assistant Attorney General

14 JONA'THAN F. 0 IN

Deputy Assistant Attorney General

15 MICHAELS. BLUME

Director, Consumer Protection Branch

16 ARTHURR. GOLDBERG

JAMES T. NELSON

17 BRADLEY COHEN

JENNIE KNEEDLER

18 SONDRA L. MILLS (CA Bar No. 090723b

United States Department of Justice} Civil ivision

19 P.O. Box 261bBenFranklin Station

Washington, .C. 20044

20 Telephone: (202) 616-2376

Facsimile: (202) 514-8742

21 Email: J arnes.Ne lson2@usdoj.gov

22 Attorneys for PlaintiffUNITED STATES OF AMERICA

JOINT STIPULATION FOR DISMISSAL OF ACTION

CASE NO. CVI3-779 DOC (JCGx)

The parties hereby stipulate as follows:

2 1. To avoid the delay, uncertainty, inconvenience, and expense of

3 protracted litigation, the parties have agreed to settle the claims made by the

4 United States in this case, as well as claims made by 19 States and the District of

5 Columbia in their own state-court actions, on the terms set forth in the fully-

6 executed Settlement Agreement attached to this Joint Stipulation for Dismissal as

7 Exhibit A.

8 2. Pursuant to the terms of the Settlement Agreement, defendants

9 McGraw Hill Financial, Inc. (formerly known as The McGraw-Hill Companies,

10 Inc.) and Standard and Poor's Financial Services, LLC (collectively "defendants")

11 have filed a withdrawal of defendants' Eleventh Affirmative Defense, which

12 asserted defendants' claim that the United States filed this action in retaliation for

13 Standard and Poor's Ratings Services' 2011 decisions to place on credit watch

14 negative and subsequently downgrade the credit rating of the United States.

15 3. Accordingly, pursuant to the terms of the Settlement Agreement, the

16 parties hereby stipulate to the dismissal, with prejudice, of this action pursuant to

17 Federal Rule of Civil Procedure 41(a)(l)(A)(ii).

18 4. Each party will bear its own costs, expenses and fees in this matter.

Ill

28 1

JOINT STIPULATION FOR DISMISSAL OF ACTION

CASE NO. CV13-779 DOC (JCGx)

SO STIPULATED.

2 Dated: February_, 2015 KEKER & VAN NEST LLP

By: Isl John W. Keker

5 John W. Keker

7 Dated: February_, 2015

8 JOYCE BRANDA STEPHANIE YONEKURA

Acting Assistant Att orney General Acting United States Attorney

9 United States Department of Justice

Civil Division

1o JONATHAN F. OLIN

D~puty Assistant Attorney General

11 MICHAEL S. BLUME lslGeo~e S. Cardona

Director, Consumer Protection Branch GE OR E S. CARDONA

12 ARTHUR R. GOLDBERG ANOIEL KHORSHID

JAMES T. NELSON Assistant United States Attorneys

13 BRADLEY COHEN

JENNIE KNEEDLER

14 SONDRA L. MILLS

Trial Attorneys, Civil Division

28 2

JOINT STIPULATION FOR DISMISSAL OF ACTION

CASE NO. CVI3-779 DOC (JCGx)

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