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S&P Accuses U.S. of Withholding Documents in Fraud Suit

bloomberg.com | August 15, 2014

By Sophia Pearson

The U.S. is withholding documents that might show the government sued Standard & Poor’s for $5 billion in retaliation for downgrading the country’s debt, the ratings company said, asking a court to compel the records’ production.

A federal judge in April ruled that S&P could seek potential evidence from the Justice Department to mount a retaliation defense to U.S. claims that it gave fraudulent ratings to mortgage-backed securities. Since then the government has turned over documents with redactions ranging from the omission of a single word on a page to multiple pages, S&P said yesterday in court papers.

“For the many reasons that unilateral redactions are disfavored, the government’s redactions for non-responsiveness should be disallowed here,” S&P lawyers wrote.

S&P is the only credit rating company sued by the Justice Department over the claim that it gave fraudulent ratings to mortgage-backed securities. The company has said it was singled out after it downgraded the U.S. debt in August 2011.

The Justice Department and ex-U.S. Treasury Secretary Timothy Geithner denied there’s a connection between the downgrade and the suit. The U.S. may seek as much as $5 billion in civil penalties from S&P.

U.S. District Judge David Carter in Santa Ana, California, in May denied Geithner’s request to disallow S&P’s subpoena, ruling that the company provided sufficient evidence of an “improper purpose” at that point in the litigation to support its request.

Relevant Documents

Even in redacted form, the documents turned over so far by the government indicate there are “scores” of other documents related to the downgrade and the decision to sue, S&P said. Its 24-page filing yesterday is also heavily redacted.

According to S&P, the government said some documents are protected as work product or are irrelevant to the request. Geithner redacted as non-responsive parts of documents “immediately adjacent to detailed discussions (and excoriations) of S&P,” it said.

“It’s hard to think of information more likely to be potentially relevant to an evaluation of motives and actions with respect to S&P’s downgrade,” the company said. “The resolution of ‘relevance’ in admittedly responsive documents cannot be left to Mr. Geithner.”

S&P requested unabridged versions of documents from both the government and Geithner, who is now president of Warburg Pincus LLC, a private equity firm in New York.

Geithner’s Role

In 2008, as New York Fed president, Geithner was instrumental in decisions to bail out insurer American International Group Inc. and to allow Lehman Brothers Holdings Inc. to fail.

Harold W. McGraw III, chairman of S&P’s parent, McGraw Hill Financial Inc., said Geithner called him days after S&P downgraded the U.S. debt and told him that the company would be held accountable for it. McGraw said Geithner told him there would be a “response” to the downgrade, which the government said was based on an error, according to court records.

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

Back to August 2014 Archive

CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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