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Geithner Must Give S&P Documents in U.S. Fraud Suit

bloomberg.com | May 18, 2014

By Edvard Pettersson

Ex-U.S. Treasury Secretary Timothy Geithner must comply with Standard & Poor’s demand that he provide documents related to its claim the U.S. sued the company in retaliation for downgrading government debt.

Harold W. McGraw III, chairman of S&P parent McGraw Hill Financial Inc. (MHFI), said in a court statement that Geithner called him days after S&P downgraded the U.S. debt in August 2011 and told him that the company would be held accountable for it. McGraw said Geithner told him there would be a “response” for the downgrade, which the government said was based on an error.

Geithner is the highest former government official S&P has pursued for information to support its allegations. S&P, the only credit rating company sued by the Justice Department for allegedly giving fraudulent ratings to mortgage-backed securities, has said it was singled out because of the downgrade.

The Justice Department and Geithner have denied there is a connection between the downgrade and the lawsuit filed last year. The government has said it may seek as much as $5 billion in civil penalties from S&P for losses to federally insured financial institutions that relied on its ratings for mortgage-backed securities and collateralized-debt obligations, or CDOs, that lost value after the housing market collapsed.

The call to McGraw took place right after Geithner had met with President Barack Obama, S&P said in February.
Sufficient Evidence

U.S. District Judge David Carter yesterday denied Geithner’s request to set aside S&P’s subpoena as well as a similar request by the Federal Reserve Bank of New York and Terrence Checki, the bank’s executive vice president. The judge said S&P had provided sufficient evidence of an “improper purpose” at this point of the litigation to support its request.

“As for any future depositions of Secretary Geithner or Mr. Checki, the court will cross that bridge when it comes to it,” Carter said.

Jenni LeCompte, a spokeswoman for Geithner, declined to comment on yesterday’s ruling, referring to a January statement that the allegation Geithner threatened S&P or prompted any retaliatory action was false.

Geithner, 52, is now president of Warburg Pincus LLC, a private equity firm in New York. In 2008, as New York Fed president, he was instrumental in decisions to bail out insurer American International Group Inc. and to allow Lehman Brothers Holdings Inc. to fail.
Geithner’s Test

In his new book “Stress Test: Reflections on Financial Crises,” published May 12, he recounts his experience as Treasury Secretary in Obama’s first term and one of the key officials grappling with the worst financial crisis since the Great Depression.

Carter last month said S&P could seek potential evidence from the Justice Department for its so-called retaliation defense, stopping short of allowing the company to ask for White House records of conversations around the time of the downgrade. The judge said in that ruling that there was circumstantial evidence of discriminatory intent.

“Secretary Geithner’s statements are susceptible to several interpretations and it is unclear whether there is a nexus between his displeasure and the Department of Justice’s litigation decisions,” the judge said last month. “But, such open questions are properly answered after, not before, discovery.”

The case is U.S. v. McGraw-Hill Cos., 13-779, U.S. District Court, Central District of California (Santa Ana).


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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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