McGraw-Hill Cos.'s Standard & Poor's unit is set to take its first stab at fending off the U.S. Justice Department’s allegations that the company's mortgage-backed securities ratings were fraudulent, Bloomberg News reported today. The largest U.S. rating company by revenue faces a deadline today to file its response in federal court in Santa Ana, Calif. Justice Department officials said that when the complaint was filed in February that S&P could face more than $5 billion in civil penalties based on losses by federally insured financial institutions that relied on S&P’s ratings. S&P cannot support its request to dismiss the case by supplying evidence to contradict the allegations, legal experts said. The U.S. said in its Feb. 4 complaint that S&P knowingly and intentionally defrauded investors in residential mortgage-backed securities and collateralized-debt obligations that included those securities for which the company provided credit ratings.
