| April 8
April 8 The United States said its $5 billion
civil fraud lawsuit against Standard & Poor's should be tried
all at once, rejecting the credit rating agency's insistence
that a single trial would be too big, confusing and unfair.
S&P, a unit of McGraw Hill Financial Inc, was
accused of causing losses for federally-insured banks and credit
unions by inflating ratings to win more fees from issuers, and
being too slow to downgrade debt backed by souring mortgages,
contributing to the 2008 financial crisis.
Last month, S&P proposed holding two trials, with the first
focused on just 17 securities out of the roughly 160 at issue,
where Citigroup Inc was alleged to have suffered losses.
In a Monday court filing, U.S. Attorney Andre Birotte in Los
Angeles said "mini-trials" would "severely prejudice" the United
States by preventing it from showing "the full and complete
nature of S&P's alleged fraud" to a single jury.
He said this would include "great swaths" of evidence that
S&P intended to defraud investors that, unlike Citigroup and
Bank of America Corp, were not involved in the issuance
of securities it rated.
Holding one trial "is particularly necessary to counter
S&P's efforts to focus on isolated employee actions at an
individual security level," Birotte wrote.
He also said two trials would likely violate the 7th
Amendment of the U.S. Constitution, by allowing different juries
to review many of the same overlapping issues in a single case.
S&P has argued that a single trial would force it to present
"overwhelming" amounts of evidence to counter the government's
claims, perhaps more easily grasped by jurors, that its ratings
lacked "independence" and "objectivity."
Catherine Mathis, an S&P spokeswoman, said on Tuesday: "The
government has alleged a case of such sweeping breadth that it
cannot fairly be tried in a single trial. Bifurcation is
efficient, practical and fair."
The lawsuit is one of several where the government has used
the Financial Institutions Reform, Recovery and Enforcement Act,
which was passed after the 1980s savings and loan scandal, to
address alleged misconduct causing the financial crisis.
U.S. District Judge David Carter in Santa Ana, California is
expected to decide by April 15 whether to bifurcate the case. A
trial is now scheduled for September 2015.
According to the government, the lawsuit addresses alleged
wrongdoing from 2004 to 2007, and covers 162 securities: 106
collateralized debt obligations (CDOs) and 56 residential
mortgage-backed securities. S&P put the combined number at 158.
The government said that if there were two trials, it would
prefer the first to focus on all the CDOs, or a subset of CDOs
that allegedly caused more than $4.5 billion of losses.
S&P has contended that the government sued in retaliation
for its 2011 decision to take away the United States' "triple-A"
rating over Washington's inability to manage the country's debt.
U.S. officials have denied such a link. The government did
not sue S&P rivals Moody's Investors Service and Fitch Ratings.
The case is U.S. v. McGraw-Hill Cos et al, U.S. District
Court, Central District of California, No. 13-00779.
(Reporting by Jonathan Stempel in New York; editing by Andrew