On July 8, 2013, the U.S. District Court for the Central District of California denied S&P’s motion to dismiss a Department of Justice suit seeking civil penalties for alleged violations of three criminal fraud statutes. United States v. McGraw-Hill Companies, Inc.,No. 13-0779 (C.D. Cal. July 8, 2013). In that suit, the government sought civil penalties under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, based on criminal violations of three federal fraud statutes by McGraw Hill’s subsidiary, S&P. The government alleged that S&P issued artificially low ratings of collateralized debt obligations (“CDOs”). . The defendants moved to dismiss, arguing that (1) the allegedly fraudulent statements are non-actionable puffery, (2) the government failed to plead facts showing that S&P’s ratings were false and misleading, and (3) the complaint failed to plead that S&P had the requisite intent to obtain money or property from the parties who were deceived, i.e., the investors. In rejecting the defendants’ arguments, the court found that the alleged misstatements were not puffery, as the complaint alleged a unified public image of trustworthiness backed by specific statements inducing customers to rely on S&P’s objectivity. In addition, the court held that the government’s allegations were sufficient to plead that S&P’s ratings were objectively and subjectively false, as the government alleged sufficient facts showing that S&P had clear knowledge that the CDOs were backed by deteriorating mortgage backed securities, and that such a change should have, but did not, affect S&P’s ratings of those CDOs. Finally, the court found that the money need not flow directly from the deceived party to the defendant, and thus that the government adequately alleged that S&P obtained money from issuers that was constructively paid by the deceived investors.