Standard & Poor’s, at the first court hearing over the U.S. government’s claims that the rating service defrauded investors, argued that reasonable investors wouldn’t have relied on its “puffery” about credit ratings, Bloomberg News reported yesterday. John Keker, a lawyer for the McGraw Hill Financial Inc. unit, yesterday told U.S. District Judge David Carter in Santa Ana, California, that S&P’s generic statements about its business aspirations weren’t material to the banks buying securities and didn’t meaningfully change the mix of information available to investors. Keker asked Judge Carter to dismiss the government’s case, which seeks as much as $5 billion in civil penalties, on the grounds that the Justice Department didn’t adequately support its allegations that the company defrauded federally insured financial institutions by knowingly understating the credit risks of securities linked to residential mortgages.
