S&P Seeks to Dismiss Securities Suit

Attorneys for ""Standard & Poor's"":http://www.standardandpoors.com/home/en/us (S&P) filed Monday a motion to dismiss a civil ""lawsuit from the federal government"":http://dsnews.comarticles/justice-department-sues-sp-alleging-inflated-ratings-2013-02-05 accusing the ratings agency of inflating ratings and misrepresenting the creditworthiness of certain securities.

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Led by Attorney General Eric Holder, the ""Department of Justice"":http://www.justice.gov/ announced in early February a complaint against S&P for allegedly defrauding investors in an attempt to gain more business. At the time, Holder noted that his department had identified more than $5 billion in losses to federally insured financial institutions resulting from collateralized debt obligations (CDOs) rated by S&P between March and December 2007.

S&P's lawyers struck back hard in their motion.

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""With much fanfare, a parade of senior officials congratulated one another for their efforts--the hundreds of subpoenas they had served, the thousands of hours their team had devoted to the case, the millions of documents they had read,"" the filing reads, referring to the Justice Department's press conference announcing the suit. ""Notwithstanding all the back-slapping, the Government's Complaint fails to state a claim.""

The document goes on to argue that the government cannot prove S&P knowingly issued rating opinions it did not believe, dismissing exchanges between employees offered by the plaintiffs as proof of intent to defraud investors.

""The Complaint's allegations--even taken as true for the purpose of this motion--reveal a robust internal debate among S&P employees about the likely future performance of complex financial instruments at the beginning of what turned into a global economic tsunami. The isolated snippets that the Government has chosen to extract from that internal debate, when properly viewed under applicable law, are far from sufficient to allege fraud under the heightened pleading standard that applies to such claims,"" the motion reads.

Finally, S&P points out that the government's complaint ""fails to identify how, if [at] all, the performance of the specific RMBSs [residential mortgage-backed securities] contained in any of the CDOs identified should have actually impacted the rating of the CDO tranche at issue.""