Tags: S&P | Fraud | Lawsuit | Judge

US Asks Judge to Deny S&P's Motion to Dismiss Fraud Lawsuit

Tuesday, 21 May 2013 08:15 AM

 

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The Justice Department has asked a federal judge to deny Standard & Poor's motion to dismiss a government lawsuit against the ratings agency, saying its statements on certain financial products were fraudulent and not mere "puffery."

In a $5 billion suit, the U.S. government has accused S&P, owned by McGraw-Hill Companies Inc., of issuing inflated ratings on faulty products to drum up business before the 2008 financial crisis, despite assurances that its judgments were objective.

S&P has denounced the lawsuit, filed in February in the Los Angeles District Court, and accuses the government of cherry-picking emails to misconstrue what its analysts did.

The agency last month asked a federal judge to dismiss the lawsuit, arguing the government's case was based on vague statements that could not prove fraud.

In its defense, S&P cited a federal court ruling, upheld by an appeals court, that described statements made about its independence as insufficient evidence for a fraud conviction.

The Justice Department argued in a court filing on Monday that far from being mere "puffery," S&P made those statements knowing they would be "relied on by investors."

S&P could not immediately be reached for comment by Reuters outside of regular U.S. business hours.

The case is in re USA vs McGraw-Hill Companies, Case No. 2:13-00779, U.S. District Court, Central District of California.

© 2014 Thomson/Reuters. All rights reserved.

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