S&P Can See Geithner Book Notes in U.S. Ratings Lawsuit

Standard & Poor’s must be given unredacted copies of former Treasury Secretary Timothy Geithner’s notes for his book, a judge said in a ruling that may boost the ratings company’s effort to prove it was sued by the government in retaliation for downgrading U.S. debt in 2011.

U.S. District Judge David Carter in Santa Ana, California, granted S&P’s request to force Geithner to provide the material. The company, a unit of McGraw Hill Financial Inc., wants the notes for its defense in the fraud lawsuit.

“A former executive official cannot, with one hand, withhold information implicated in a case of significant public importance while, with the other, collect money from sales of a tell-all book containing much the same information,” Carter said in the ruling made public today. The judge reviewed the notes before making a decision.

The government and S&P are in the information-sharing stage of a lawsuit filed last year, in which the U.S. accused the company of lying about its ratings’ being free of conflicts of interest. The government may seek as much as $5 billion in civil penalties for losses to federally insured financial institutions that relied on the company’s investment-grade ratings for mortgage-backed securities and collateralized-debt obligations.

The judge ruled in March that S&P would be allowed to seek information from Geithner about what the company said was a “threatening” call he made to Harold W. McGraw III days after S&P’s downgrade of the U.S. debt in 2011. The judge said at the time that he was concerned the call to McGraw Hill Financial’s chairman was intended to have a “chilling effect.”

‘Stress Test’

Floyd Abrams, a lawyer for S&P, argued at a Sept. 9 hearing that the company should get copies of Geithner’s notes for his book “Stress Test: Reflections on Financial Crises” that are relevant to the company and the downgrade.

“In two instances, they have literally taken out a word in the middle of a discussion of Standard & Poor’s,” Abrams told Carter, referring to redacted notes Geithner previously provided. “They both appear to be scatological in nature.”

Nicholas Tompkins, a lawyer for Geithner, said at the hearing that S&P got all the material that was relevant to its purported defense and that individual words had been redacted out of concern the notes might get leaked to the media.

Tompkins didn’t immediately respond to an e-mail today seeking comment on the ruling.

Earlier Ruling

Carter also granted S&P’s request to get unredacted copies of Justice Department documents that may be relevant to its defense, including e-mails among government officials commenting on the downgrade.

“These e-mails include communications between high-level officials in the U.S. Department of Justice, and actually tend to exculpate the government,” the judge said. “While this evidence potentially cuts against S&P’s selective-prosecution defense, S&P is entitled to both the good and the bad.”

The judge said the Justice Department didn’t have to give S&P some documents that only passingly referred to either the downgrade or to the government’s decision to bring the lawsuit. At this point, S&P couldn’t ask prosecutors to collect communications between the Justice Department and the Treasury with the White House, Carter said.

The case is U.S. v. McGraw-Hill Cos., 13-cv-00779, U.S. District Court, Central District of California (Santa Ana).

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