In its 119-page Feb. 4 complaint, the Justice Department cited meetings, messages and memos that it said showed S&P’s analysts assigned investment-grade ratings to securities based more on a desire to win business than to be accurate.

The lawsuit was brought by U.S. Attorney Andre Birotte Jr. in Los Angeles under the 1989 Financial Institutions Reform, Recovery and Enforcement Act, a law passed after the savings and loan crisis to allow the government to seek civil penalties for losses of federally insured financial institutions caused by fraud.

S&P argued in its April 22 filing that it’s “ironic” that the government seeks penalties for losses by the same banks, Bank of America Corp. and Citigroup Inc., that were creating and selling the CDOs.

“The complaint charges S&P with intending to defraud these financial institutions about the likely performance of their own products,” the company said.

Banks create collateralized debt obligations by bundling bonds or loans into securities of varying risk and return. They pay ratings firms for the grades, which investors may use to meet regulatory requirements.

The case is U.S. v. McGraw-Hill Cos., 13-cv-00779, U.S. District Court, Central District of California (Santa Ana).

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