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S&P moves closer to Geithner deposition

Standard & Poor's moved a step closer to deposing former Treasury secretary Tim Geithner in its attempt to prove that the government's fraud case against the rating agency was brought in retaliation for its downgrade of the US credit rating.

A California judge on Tuesday granted S&P permission to access federal documents from the days after it stripped the US of its triple A rating in August 2011.

Those include documents related to a phone call that Mr Geithner placed to Terry McGraw, then chief executive of S&P's parent company, on the morning after the downgrade, when - according to Mr McGraw - the Treasury secretary said its conduct would be "looked at very carefully".

The Department of Justice launched a $5bn civil fraud claim against S&P last year, alleging it gave artificially high ratings to mortgage derivatives in the run up to the credit crisis, in order to win fees from issuers.

S&P, the only one of the three major rating agencies to be sued, denies the claims.

The DoJ had argued that S&P did not present enough evidence for its defence that the government had acted in retaliation for the downgrade.

However, Judge David Carter ruled the evidence was "circumstantial but sufficient" to allow the rating agency's lawyers access to most of the government documents.

"Secretary Geithner responded to S&P's downgrade by pointing to S&P's history of errors and promising that its conduct would be 'looked at very carefully'. He levied these criticisms just minutes after speaking to other executive officials, including President Obama," the judge wrote.

"Secretary Geithner's statements are susceptible to several interpretations and it is unclear whether there is a nexus between his displeasure and the Department of Justice's litigation decisions. But, such open questions are properly answered after - not before - discovery."

A spokesman for Mr Geithner said: "The allegation that former Secretary Geithner threatened or took any action to prompt retaliatory government action against S&P is false."

The court did carve out an exemption for the office of the president, which will not have to give up documents, although it said it may revisit that exemption at a later date.

S&P's lawyers are expected to apply for permission to take a deposition from Mr Geithner under oath after examining the federal documents, according to people familiar with the defence. The DoJ did not immediately return a request for comment.

The California court also ruled that S&P could seek documents related to the DoJ investigations into other rating agencies' work on mortgage derivatives, but it turned down the company's request to have the trial split into separate phases.

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