S&P Wants Government Documents About Other InvestigationsEdvard Pettersson
McGraw Hill Financial Inc.’s Standard & Poor’s, preparing its defense to the fraud lawsuit by the U.S. Justice Department, will ask the government for information about investigations of other credit raters.
The Justice Department and S&P yesterday filed a joint report ahead of a hearing July 29 in federal court in Santa Ana, California. The report lays out the kind of evidence each side will seek from the other in preparation for a trial of the government’s claims that S&P lied to investors about its ratings being independent and free of conflicts of interest.
S&P wants the government to provide it with documents about its investigation of S&P and others, about the government’s decision to file the lawsuit, and information the government received about residential mortgage-backed securities and collateralized-debt obligations in investigations of others, including other credit rating providers.
The parties “anticipate that S&P’s document discovery in these areas will generate objections from the government,” according to the filing.
The Justice Department will initially seek evidence related to whether particular S&P-rated residential mortgage-backed securities and CDOs were affected by the alleged fraud and the losses to financial institutions from these particular securities, according to the filing.
The Justice Department seeks as much as $5 billion in civil penalties from New York-based S&P, based on losses federally insured financial institutions incurred from investments in mortgage-backed securities and CDOs that included these securities, which had received investment-grade credit ratings from S&P.
U.S. District Judge David Carter on July 16 denied S&P’s request to throw out the government’s complaint without ruling on the merits of the allegations. The Justice Department in its complaint met the legal standards to proceed with its fraud claims, the judge said.
Edward Sweeney, a spokesman for S&P, and Thom Mrozek, a spokesman for U.S. Attorney Andre Birotte Jr. in Los Angeles, declined to comment on the filing.
The case is U.S. v. McGraw-Hill Cos., 13-cv-00779, U.S. District Court, Central District of California (Santa Ana).