Liquidators for two Bear Stearns Cos. hedge funds sued the three major credit-rating firms in New York State Supreme Court for allegedly misrepresenting their independence and the accuracy of their ratings, seeking $1.12 billion in damages, the Wall Street Journal reported today. The filing related to the ratings appears to be timed to beat the statute of limitations for fraud cases in New York state, which is six years, say lawyers uninvolved in the case. The rating firms—Standard & Poor's Ratings Services, Moody's Investors Service and Fitch Ratings—began their en masse downgrades of hundreds of securities backed by mortgages in July 2007. The liquidators allege that the rating firms "intentionally and knowingly misrepresented information concerning their independence, the accuracy of their ratings, the quality of their models, and the extent of their surveillance" on securities known as collateralized-debt obligations and residential-mortgage-backed securities. The lawsuit comes more than five years after Bear Stearns, a storied Wall Street investment bank, buckled under a load of mortgage-related debt. JPMorgan Chase & Co. purchased the securities firm in March 2008.
