McGraw Hill Financial Inc.’s Standard & Poor’s unit must face California’s claims it deceived the state’s pension funds in its ratings of mortgage-back securities, a judge said in a provisional ruling, Bloomberg News reported on Saturday. California Superior Court Judge Curtis Karnow in San Francisco said on Friday that he was inclined to deny the company’s request to throw out the state’s claims of deceptive conduct from a lawsuit alleging S&P violated false-advertising and business practices laws. The state accuses S&P of using “magic numbers” to inflate ratings of mortgage-backed securities bought by the California Public Employees’ Retirement System and the state’s teacher pension fund. The funds lost more than $1 billion on the investments, according to the state.
