‘Meritless’ Lawsuits
Spokeswoman Catherine Mathis said the firm would “vigorously defend S&P against these unwarranted claims” which she said were part of “meritless civil lawsuits.”
“Claims that we deliberately kept ratings high when we knew they should be lower are simply not true,” Mathis said in a Feb. 5 statement.
Holder said the Justice Department “would not have brought this case unless we felt we had a case that we could bring and that we would win.”
“And that’s what I expect to have happen,” he said.
Holder and West declined to comment on whether Moody’s or Fitch might face similar charges.
Penalties for false representations, concealed facts and manipulated criteria linked to ratings on portions of more than $4 trillion of debt securities could reach $5 billion, the Justice Department said. That is more than enough to exhaust New York-based McGraw-Hill’s $1.2 billion of cash on hand and the $1.86 billion of excess funds that analysts project the company will generate this year.
Free Speech
Floyd Abrams has defended S&P’s ratings on free speech grounds. Abrams is the Cahill Gordon & Reindel LLP attorney who defended the New York Times and won a Supreme Court decision upholding the publication’s First Amendment rights in the Pentagon Papers case, and then faced criticism for his work defending reporters in the investigation over the leak of a Central Intelligence Agency operative’s name during President George W. Bush’s administration.
The lawsuit’s approach, alleging that S&P knew its ratings were faulty, will require a different defense, Abrams said in a Feb. 5 Bloomberg Television interview.