The Justice Department, along with state prosecutors, plans to file civil charges against Standard & Poor’s Ratings Service, accusing the firm of fraudulently rating mortgage bonds that led to the financial crisis, people briefed on the plan said Monday.
Up until last week, the Justice Department had been in settlement talks with S&P, these people said. But the negotiations broke down after the Justice Department said it would seek a settlement in excess of “10 figures," or at least $1 billion, these people said, which would wipe out the profits of S&P’s parent, the McGraw-Hill Co., for an entire year.
McGraw-Hill earned $911 million in 2012.
A suit against S&P would be the first the government has brought against the credit ratings agencies related to the financial crisis, despite continued questions about the agencies’ conflicts of interest and role in creating a housing bubble.
By bringing a civil suit, as opposed to a criminal case, the Justice Department’s burden of proof will be less, perhaps lowering the bar for a successful prosecution.
