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S&P demand for White House communications opposed by U.S.

Edvard Pettersson//August 27, 2014

S&P demand for White House communications opposed by U.S.

Edvard Pettersson//August 27, 2014

Standard & Poor’s isn’t entitled to the Justice Department’s communications with the White House to bolster its defense that a U.S. fraud lawsuit was retaliation for S&P’s downgrade of the nation’s debt, the government said.

U.S. lawyers said the McGraw Hill Financial Inc. unit’s request that the Justice and Treasury departments search for and turn over communications with the White House conflicts with a judge’s previous order that the Executive Office of the President would be off-limits for now, according to a filing Monday in federal court in Santa Ana, California.

New York-based S&P and the U.S. are collecting potential evidence and interviewing witnesses ahead of a trial next year over the government’s claim that the company lied to investors by saying that its ratings of securities linked to residential mortgages were objective and free of conflicts of interest. The U.S. is seeking as much as $5 billion in civil penalties.

“This request is both out of line with the court’s previous order and inconsistent with relevant Supreme Court authority,” the Justice Department said in Monday’s filing.

S&P has argued the government’s lawsuit, filed last year, is payback for the company’s downgrade of the U.S. two years earlier. S&P, which was the only debt rater to downgrade the U.S., said in court filings that then-Treasury Secretary Timothy Geithner called the company’s chairman at the time and told him the downgrade “would be looked at very carefully.”

Retaliation argument

The Justice Department also said that it will provide U.S. District Judge David Carter, who is overseeing the case, with the documents S&P alleges the government is withholding or improperly redacting so that the judge can determine whether they are relevant to the company’s retaliation argument.

Catherine Mathis, a spokeswoman for S&P, declined to comment on the government’s filing.

Geithner said in a separate filing that he has provided S&P with “raw, unpublished” materials that were used for his recent book, “Stress Test: Reflections on Financial Crises,” and that contained a limited number of isolated references to S&P and to its downgrade of the U.S. debt.

Geithner, who is now president of Warburg Pincus LLC, a private equity firm in New York, said that the documents he provided were redacted and that he shouldn’t be forced to give S&P additional unpublished material for his book that isn’t relevant to the company and its lawsuit.

“Mr. Geithner produced the portions of these documents that were responsive to S&P’s document requests in full,” according to the filing.

The documents were redacted to “protect Mr. Geithner’s privacy, confidentiality, and proprietary interests in the rest of these materials, which include discussion of his unpublished private thoughts on confidential and sensitive aspects of his service as Secretary of the Treasury,” according to the filing.

The Justice Department and Geithner have denied there’s a connection between the downgrade and the lawsuit.

Even in redacted form, the documents turned over so far by the government indicate there are “scores” of other documents related to the downgrade and the decision to sue, S&P said in its request this month for a court order to force Geithner and the Justice Department to hand over withheld information.

According to S&P, the government said some documents are protected as work product or are irrelevant to the request. Geithner redacted as non-responsive parts of documents “immediately adjacent to detailed discussions (and excoriations) of S&P,” it said.

“It’s hard to think of information more likely to be potentially relevant to an evaluation of motives and actions with respect to S&P’s downgrade,” the company said in its Aug. 12 filing. “The resolution of ‘relevance’ in admittedly responsive documents cannot be left to Mr. Geithner.”

S&P requested unabridged versions of documents from both the government and Geithner.

The case is U.S. v. McGraw-Hill Cos., 13-cv-779, U.S. District Court, Central District of California (Santa Ana).

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