April 29 (Reuters) – Morgan Stanley and two ratings agencies
have agreed to pay about $225 million to settle lawsuits
claiming they concealed risks in two mortgage-related deals that
collapsed during the financial crisis, the Wall Street Journal
reported on Monday.
The cost of the settlement will be shared equally among the
investment bank and the two ratings firms, Moody’s Investors
Service and Standard & Poor’s, according to the Journal.
The companies announced the settlement on Friday but did not
disclose the amount.
The lawsuits had accused Moody’s, a unit of Moody’s Corp
, and S&P;, a unit of McGraw-Hill Cos, of
negligent misrepresentation over their activities regarding the
Cheyne and Rhinebridge structured investment vehicles (SIVs).
Morgan Stanley, which marketed both SIVs and helped
structure the Rhinebridge SIV, faced similar accusations.
A trial in the Cheyne case had been scheduled for May 6.
In both cases, investors accused the ratings agencies of
collaborating with banks in arranging for SIVs to receive
ratings as high as “triple-A,” even though much of the
underlying collateral was low-quality or subprime mortgage debt.
The cases are Abu Dhabi Commercial Bank et al v. Morgan
Stanley & Co et al, U.S. District Court, Southern District of
New York, No. 08-07508; and King County, Washington et al v. IKB
Deutsche Industriebank AG et al in the same court, No. 09-08387
