Another Unusual Defense – S&P Says Its Claims to Honest Objectivity Were ‘Puffery’

If you're a ratings agency, is "puffery" a viable defense against fraud and misrepresentation charges? S&P Rating thinks so. Jesse of the Cafe Americain is equates it with the comatose CEO and the blind regulator. 

Another Unusual Defense – S&P Says Its Claims to Honest Objectivity Were 'Puffery'

When the truth becomes tortured enough, the rationalizations for failure and deception become increasingly bizarre.

There is the CEO defense: I wasn't really involved in the things for which I received huge sums of money.

There is the regulator/economist defense: We didn't know because we didn't see it.

And now we have the ratings agency defense: It can't be fraud, because everyone knows we are lying.

This isn't all that far from that venerable Wall Street defenses so often trotted out after a stock bubble and fraud collapses:  Well, no one made them give us their money and "Everyone was doing it."

These are tales from the schoolyard.  And as in that case, someone needs to get out the wooden spoon.

What a world.  

WSJ
S&P Has Unusual Defense
By Jeanette Neumann
April 22, 2013, 3:00 p.m. ET

Standard & Poor's Ratings Services has long declared that its letter-grade ratings are independent and objective, part of a bid to allay concerns over its business model…

Now, lawyers defending the company against the Justice Department's recent civil lawsuit say that statements about independence and objectivity are "puffery" and were never meant to be taken at face value by investors… 

The federal government says that the rating firm committed fraud when it allegedly misrepresented its ratings as independent and objective.

"Even if it's a viable legal argument, it's a pretty unattractive argument for S&P to be putting forward since they're basically in the business of charging clients for their reputation," said Samuel Buell, a law professor at Duke University and a former federal prosecutor. "What they're saying here is, 'When we're talking to investors about our own reputation, we're engaging in meaningless puffery.' "

Read the remarkable story here.