U.S. trial over S&P ratings could begin in September 2015, take 4 months

SANTA ANA CALIFORNIA Tue Jul 29, 2014 5:52pm EDT

A view shows the Standard & Poor's building in New York's financial district February 5, 2013. REUTERS/Brendan McDermid

A view shows the Standard & Poor's building in New York's financial district February 5, 2013.

Credit: Reuters/Brendan McDermid

SANTA ANA CALIFORNIA (Reuters) - A trial on the U.S. government's $5 billion lawsuit against Standard & Poor's over the company's ratings of mortgage bonds prior to the 2008 financial crisis could begin in September 2015 and last four months, the federal judge overseeing the case said on Tuesday.

A trial against S&P, a unit of McGraw Hill Financial Inc, could ideally be wrapped up before the 2015 holiday season, Judge David Carter, of U.S. District Court for the Central District of California, said at a hearing. He declined to set a firm starting date.

The length of the trial and the millions of pages of documents needed for it reflect the challenges facing S&P, the largest U.S. credit rating agency, as it defends against lawsuits alleging it placed its own financial interests ahead of those of investors.

Last year, the U.S. Department of Justice and many states accused S&P of fraudulently representing that its ratings on structured finance securities were objective and not tainted by conflicts of interest.

In June, S&P suffered a setback when another federal judge ruled that it must defend separately against similar lawsuits by 16 U.S. states and Washington, D.C.; on Tuesday S&P said it is now doing so.

Two weeks ago, The Wall Street Journal reported that S&P was open to paying $1 billion to resolve the federal lawsuit, citing people familiar with the matter.

That issue was not addressed at Tuesday's hearing, where S&P and its investment banking clients argued over who would foot the bill for the documents that the banks would need to produce for the government's case.

A lawyer for Bank of America Corp's Countrywide unit said the bank anticipated having to produce 100 million pages of documents, while a lawyer for Citigroup Inc said that bank has already turned over 16.5 million pages.

The paperwork has gotten so expansive that a lawyer for Deutsche Bank AG said the German lender had sent millions of pages of documents to India and other countries for workers there to conduct an initial review.

"Are you saying that citizens of another country are reviewing American citizens' banking records?" Carter said, prompting laughter in the courtroom.

The Deutsche Bank lawyer responded that the outsourcing saved money.

(Reporting by Dana Feldman in Santa Ana, California; Writing by Aruna Viswanatha and Jonathan Stempel; Editing by Leslie Adler)