S.&amp - P. Calls Federal Fraud Suit Payback for Credit Downgrade - NYTimes.com Standard & Poor's on Tuesday denounced a $5 billion fraud lawsuit by the United States government as retaliation for its 2011 decision to strip the country of its AAA credit rating. The McGraw Hill Financial unit of S.& P. was the only major credit rating agency to remove the United States" top rating, and the only one the Justice Department sued over claims of misleading banks and credit unions about the credibility of its ratings before the 2008 financial crisis. In a filing on Tuesday in Federal District Court in Santa Ana, Calif., S.& P. said that the lawsuit was an effort to punish it for exercising its First Amendment rights and that the suit seeks "excessive fines" in violation of the Eighth Amendment. It said the government's "impermissibly selective, punitive and meritless" lawsuit was brought "in retaliation for defendants" exercise of their free-speech rights with respect to the creditworthiness of the United States of America." A Justice Department spokesman declined to comment. S.& P. seeks the dismissal of the lawsuit, which in July, Judge David Carter of Federal District Court allowed to go forward, with prejudice, meaning that it cannot be brought again. The August 2011 downgrade of the United States" credit rating to AA-plus from AAA reflected concern about the federal government's ability to address the nation's swelling debt. The government's Feb. 4 lawsuit accused S.& P. of inflating ratings to win more fees from issuers, and failing to downgrade ratings for collateralized debt obligations despite knowing they were backed by deteriorating residential mortgage-backed securities. In Tuesday's filing, S.& P. estimated that more than $4.6 billion of the losses it claims might have resulted from collateralized debt obligations that were structured, marketed or sold by Bank of America or Citigroup. It also said more than $1 billion came from debt that had never been issued. S.& P. also said the government lacked authority to sue under the Financial Institutions Reform, Recovery and Enforcement Act of 1989, because no federally insured financial institutions had been affected by violations. The government has in recent months made more use of that act, which was passed after the 1980s savings and loan crisis, in part because it has a lower burden of proof and a longer statute of limitations than other laws.