Mizuho Financial Group has agreed to pay US$128m in settlement of a Securities and Futures Commission's (SEC) claim that it used dummy assets to inflate credit ratings for products linked to subprime mortgages.
According to the SEC, the US brokerage arm of Japan's third biggest bank misled Standard & Poor's (S&P) about assets behind some US$1.6bn in collateralised debt obligations (CDOs) that the firm was structuring.
Mizuho then marketed and sold the CDO product known as Delphinus CDO 2007-1 on the strengths of its falsely obtained rating, before the product defaulted in 2008.
"This case demonstrates once again that bankers and market participants who embrace a 'get the deal done at all costs' strategy will be identified, charged and punished," SEC enforcement director Robert Khuzami said in a statement.
Delphinus collateral manager, Delaware Asset Advisers, has paid out US$4.8m in relation to the claim, while Goldman Sachs and JPMorgan Chase & Co are facing similar SEC actions targeting complex investments linked to soured mortgages that fanned the global financial crisis.
In response, Mizuho said that the duping of S&P was isolated to only a few people. Head of the deal's structuring group, Alexander Rekeda, and the transaction modeller, Xavier Capdepon, have each agreed to pay US$125,000 and will be suspended from the securities industry for one year.
Primary structurer for the Delphinus product, Gwen Snorteland, has consented to a one-year suspension from the industry.
None of the three admitted to or denied any of the SEC allegations of wrongdoing.