Standard & Poor’s employees sang and danced to a mock song inspired by “Burning Down the House” and joked about the company’s willingness to rate deals “structured by cows” before the 2008 global financial collapse, according to a U.S. government lawsuit.

Two S&P analysts in April 2007 discussed the company’s model for collateralized debt obligations, with one messaging that a deal was “ridiculous” and that S&P “should not be rating it,” according to the complaint filed Feb. 4 in federal court in Los Angeles.

“We rate every deal,” the other replied, prosecutors said. “It could be structured by cows and we would rate it.”

The analysts’ messages are among internal communications cited in the Justice Department’s complaint against S&P and its parent, New York-based McGraw-Hill Cos.

The U.S. claims S&P, driven by a desire to increase revenue and market share, defrauded investors as it issued ratings on mortgage products while ignoring market risks. It rated more than $2.8 trillion of residential mortgage-backed securities and about $1.2 trillion of collateralized-debt obligations from September 2004 to October 2007, the government said.

A 2008 investigation into credit rating companies by the U.S. Securities and Exchange Commission found that that the firms improperly managed conflicts and weighed the risk of losing market share based on their ratings.

Ratings Report

The report on Moody’s Investors Service, S&P and Fitch Ratings cited the discussion about the deal structured by “cows” and quoted an analyst who wrote in an e-mail: “Let’s hope we are all wealthy and retired by the time this house of cards falters.”

According to the U.S. lawsuit, S&P in 2004 was considering a process for changing its rating criteria and reached out to investors and issuers of mortgage securities for their feedback. One executive questioned this practice, saying, “[W]e NEVER poll them as to content or acceptability!”

Employees meanwhile were raising concerns about losing deals to competitors, according to the complaint. One analyst in May 2004 wrote that the company was losing a “huge” deal to a competitor because S&P was more conservative than others, the government said.