Standard & Poor's has broken its relative silence over the US government's $5 billion fraud lawsuit against it in style. Slamming the DoJ's suit as "impermissibly selective, punitive, and meritless," S&P - seeking to dismiss the lawsuit with prejudice - exclaimed that the suit was brought "in retaliation for [their] exercise of their free speech rights with respect to the creditworthiness of the United States of America." The government says there was "no connection" between the downgrade and the filing of the lawsuit which is focused on the S&P inflating ratings to win more fees from issuers and failing to downgrade CDOs. Interestingly, as Reuters notes [10], S&P noted yesterday that $4.6bn of the alleged losses were from CDOs structured and marketed by BofA and Citi...
Via Reuters, [10]
...
The McGraw Hill Financial Inc unit was the only major credit rating agency to take away the United States' top rating, and the only one sued by the U.S. Department of Justice for allegedly misleading banks and credit unions about the credibility of its ratings prior to the 2008 financial crisis.
...
It said the government's "impermissibly selective, punitive and meritless" lawsuit was brought "in retaliation for defendants' exercise of their free speech rights with respect to the creditworthiness of the United States of America."
...
On February 5, Associate Attorney General Tony West, who then held that role in an acting capacity, said there was "no connection" between the downgrade and the filing of the lawsuit. The government said its investigation began in November 2009.
In its lawsuit, the government accused S&P of inflating ratings to win more fees from issuers, and failing to downgrade collateralized debt obligations despite knowing they were backed by deteriorating residential mortgage-backed securities.
In Tuesday's filing, S&P estimated that more than $4.6 billion of the alleged losses may have resulted from CDOs that were structured, marketed or sold by Bank of America Corp or Citigroup Inc. It also said more than $1 billion came from debt that was never issued in the first place.
...
S&P is separately trying to dismiss similar lawsuits by 15 U.S. states now pending in the U.S. District Court in Manhattan. The states want these cases moved to state courts.