(Bloomberg) -- Moody’s Investors Service Inc. agreed to pay $130million to settle claims by the California Public Employee RetirementSystem over allegedly inflated ratings onresidential-mortgage bond deals.

The largest U.S. state pension fund’s accord with Moody’smeans the company averts a trial over the securities that was tobegin in May.

The settlement follows the related February 2015 announcementthat McGraw Hill Financial Inc.’s Standard & Poor’s paid $125million to settle claims by CalPERS over grades on subprimemortgages during the run-up to the 2008 financial crisis. WithTuesday’s announcement, ratings companies have paid CalPERS$255 million to resolve such claims, the retirement systemsaid.

Read: CalPERS pension hammer forces judge'sgavel

The conclusion of the investor suit comes as the U.S. JusticeDepartment is deciding whether it will sue Moody’s Corp. oversimilar claims about mortgage bonds at the heart of the financialmeltdown, according to people familiar with the matter.

The multiyear inquiry into Moody’s was among the remaining liveinvestigations into the mortgage lenders, Wall Street banks andratings firms that the government has sought to hold accountablefor the crisis.

A year ago Standard & Poor’s paid $1.5 billion to resolveallegations that it inflated ratings to gain business during thehousing boom.

Shareholder benefit

“The resolution of this long-running litigation, which concernsthree structured investment vehicles that Moody’s rated in 1995,2002 and 2005, is in the best interest of our company and itsshareholders,” Michael N. Adler, a Moody’s spokesman, saidWednesday by e-mail.

Moody’s said in October that since 2007 almost 60 cases overbond ratings had been filed, and that fewer than 20 percent of themremain unresolved. Internationally, six such cases remained as ofSeptember, according to Moody’s, while 21 of those suits have beendismissed or withdrawn.

Matthew Jacobs, general counsel for CalPERS, said the settlement“restores money that belongs to our members and employers.”

“We are eager to put this money back to work to help ensure thelong-term sustainability of the fund,” he said in a statement.

The separate McGraw Hill accord with CalPERS was part of a$1.5 billion settlement to resolve similar allegations from theJustice Department and more than a dozen states.

Connecticut’s case against Moody’s is active, Jaclyn M.Falkowski, a spokeswoman for the state attorney general’s office,said by e-mail. “Any settlement with CalPERS has no effect onthe Connecticut lawsuit,” she said.

Fitch lawsuit

CalPERS sued the companies along with Fitch Ratings Ltd. in2009 alleging it sustained losses of as much as $1 billion from“wildly inaccurate” risk assessments. CalPERS said it put $1.3billion into three investment vehicles backed by subprime mortgagesin 2006 and 2007. The investments crumbled amid the housingcrisis.

Fitch settled negligence claims brought by CalPERS in 2011after denying liability. That settlement didn’t require any paymentto CalPERS.

“It definitely puts pressure on other cases to settle,” JackChen, a principal at Pronetik Consulting and a Calpers casewitness, said by phone. “If there was any smokinggun, CalPERS would have pressed for trial. These arecomplicated cases and litigating them isn’t easy.”

The case is California Public Employees’ Retirement Systems v.Moody’s Corp., CGC 09-490241, California Superior Court (SanFrancisco).

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