The original Complaint charges McGraw-Hill’s Chief Financial Officer and Executive Vice President of with violations of federal securities laws. Plaintiff claims that defendant's misleading statements or omissions concerning McGraw-Hill's business and operations caused the Company's stock price to become artificially inflated, inflicting damages on investors. Specifically, the Complaint alleges the defendant misrepresented or failed to fully disclose that McGraw-Hill's subsidiary Standard & Poor's assigned excessively high ratings to bonds backed by risky subprime mortgages -- including bonds packaged as collateralized debt obligations -- which was materially misleading to investors concerning the quality and relative risk of these investments.
According to a press release dated February 14, 2008, in an order handed down on Monday, Judge Colleen Kotelly of the U.S. District Court for the District of Columbia appointed the Boca Raton Firefighters and Police Pension Fund as lead plaintiff in the securities class action suit. She named the fund's attorneys, from Coughlin Stoia, lead counsel. In naming lead plaintiff and counsel, Judge Kotelly granted the Boca Raton fund leave to amend the complaint in the case, setting an April 16 deadline for any changes.
Plaintiffs filed the First Consolidated Complaint on May 7, 2008. The complaint adds the Company as well as the current President and CEO to the defendants list. On June 18, 2008, the judge transferred the case from the U.S. District Court for the District of Columbia to the U.S. District Court for the Southern District of New York.
After being transferred plaintiffs filed a Amended Consolidated Class Action Complaint on December 3, 2008. On February 3, 2009, the defendants filed a motion to dismiss the Amended Consolidated Class Action Complaint. The motion is currently pending before the Court.
On June 30, 2010, the Court ordered the plaintiffs to file a Second Amended Consolidated Complaint and the motions to dismiss were denied as moot. On July 1, 2010, the plaintiffs filed a Second Amended Complaint. The defendants responded by filing a motion to dismiss the Second Amended Complaint on July 28, 2010.
On January 15, 2013, the United States Court of Appeals for the Second Circuit issued a Summary Order that the judgment of the District Court is affirmed. The Court of Appeals supported the District Court’s analysis that the statements provided by the Fund were too general and not deemed meaningful to an investor. The Court also did not find significant evidence proving that McGraw Hill executives intended to defraud investors.