Good morning -- and thank you all for being here. Today, I am joined by Acting Associate Attorney General Tony West; Principal Deputy Assistant Attorney General for the Civil Division Stuart Delery; United States Attorney Andre Birotté, Jr., for the Central District of California; and attorneys general from six states and the District of Columbia -- in announcing the latest steps forward in our ongoing efforts to protect the American people from financial fraud, to hold accountable those who violate our laws and abuse the public trust, and to seek justice for all whose lives were devastated by the recent economic crisis.
Yesterday, the Justice Department filed a civil lawsuit against Standard & Poor's Financial Services -- as well as its parent company, McGraw-Hill -- alleging that the credit rating agency S&P engaged in a scheme to defraud investors in financial products known as Residential Mortgage-Backed Securities, or RMBS, and Collateralized Debt Obligations, or CDOs. We allege that, by knowingly issuing inflated credit ratings for CDOs -- which misrepresented their creditworthiness and understated their risks -- S&P misled investors, including many federally insured financial institutions, causing them to lose billions of dollars. In addition, we allege that S&P falsely claimed that its ratings were independent, objective, and not influenced by the company's relationship with the issuers who hired S&P to rate the securities in question -- when, in reality, the ratings were affected by significant conflicts of interest, and S&P was driven by its desire to increase its profits and market share to favor the interests of issuers over investors.
Yesterday's action was brought under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, which allows the Justice Department to seek civil penalties equal to the losses suffered by federally insured financial institutions. To date, we have identified more than $5 billion in such losses, resulting from CDOs that were rated by S&P between March and October 2007. During this period, nearly every single mortgage-backed CDO that was rated by S&P not only underperformed -- but failed.
Put simply, this alleged conduct is egregious -- and it goes to the very heart of the recent financial crisis. Our investigation into this matter began in November 2009, in connection with the President's Financial Fraud Enforcement Task Force. And it showed that -- as early as 2003 -- analysts within S&P raised concerns about the accuracy of the company's rating system, as well as the underlying methodology. S&P executives allegedly ignored these warnings, and -- between 2004 and 2007 -- concealed facts, made false representations to investors and financial institutions, and took other steps to manipulate ratings criteria and credit models to increase revenue and market share.
Even in 2007 -- when S&P's internal data showed a severe deterioration in the creditworthiness of the RMBS it had rated -- S&P allegedly continued to rate hundreds of billions of dollars' worth of CDOs backed by RMBS collateral -- ignoring their own analysts' performance projections showing that the ratings on that collateral would not hold.
The action we announce today marks an important step forward in the Administration's ongoing efforts to investigate -- and punish -- the conduct that is believed to have contributed to the worst economic crisis in recent history. And it's just the latest example of the critical work that the President's Financial Fraud Enforcement Task Force is making possible . The complaint we filed yesterday compliments the actions of the Task Force's Working Groups -- including the Residential Mortgage-Backed Securities Fraud Working Group, the Mortgage Fraud Working Group, and the Securities and Commodities Fraud Working Group -- members of which played key roles in the cases announced today. I've been honored to chair the Task Force since its inception in 2009 -- and I'd like to take a moment to acknowledge the Task Force members; Justice Department leaders; and talented investigators, prosecutors, law enforcement officers, and other partners -- particularly the attorneys general from six states and the District of Columbia who are with us today, and a number of others who will also be advancing parallel actions -- who contributed to this investigation, and who continue to advance a wide range of important matters -- both civil and criminal -- across the country.
Thanks to their tremendous efforts -- over the last three fiscal years alone -- the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants -- including more than 2,900 mortgage fraud defendants. I believe we can all be proud of these results, and encouraged by the significant action we've gathered to announce. But it's clear that we cannot yet be satisfied. And that's why, here in Washington and across the country, this critical work continues. Our determination to build on the progress that's been made -- and to strengthen the partnerships we've established across all levels of government and law enforcement -- has never been stronger. And -- as this action proves -- our approach has never been more strategic, more comprehensive, or more effective .
Once again, I'd like to thank everyone who made this announcement possible. At this time, I'd like to turn things over to Acting Associate Attorney General West, who will provide additional details.