NEWARK, N.J. (AP) -- New Jersey officials sued the securities rating firm Standard & Poor's on Wednesday, joining a growing number of states accusing the company of misleading consumers about its ratings.
In a complaint filed in state court in Newark, the Attorney General's Office accused the firm and its parent company, New York City-based McGraw Hill Financial Inc., of violating the state's consumer fraud law, though it does not say how much the alleged actions cost the state's investors.
The state alleges the company claimed to provide independent analysis on investments when it actually favored its own investment banking clients out of fear that giving negative ratings would drive the banks to other ratings firms.
In the lawsuit, the state says S&P used troublesome ratings methods and was lax in monitoring the securities it had already rated.
"The independence and objectivity of Standard and Poor's is of critical importance to New Jersey consumers, who placed their trust in the company's supposedly objective analysis," Acting Attorney General Hoffman said in a statement. "Our lawsuit alleges that this trust was misplaced, because Standard & Poor's was not providing independent investor information, but instead acting in its own business interests, and in the interests of favored clients."
S&P spokesman Ed Sweeney said in an email Wednesday that the firm will fight the suit, saying the claims are "simply not true."
The federal government, the District of Columbia and 17 other states are suing for similar reasons.
In a legal filing, it S&P has said that it believes the federal government's similar claims against the company, filed in February in U.S. District Court in Santa Ana, Calif., was retaliation for lowering its rating of the government's bonds in 2011.
S&P also lowered its outlook for New Jersey last year.