The Wall Street Journal broke the news citing "people familiar with the matter," and The New York York Times is pinning its reporting on S&P, which tells the newspaper it is expecting a lawsuit.
The Wall Street Journal explains:
"The likely move by U.S. officials would be the first federal enforcement action against a credit-rating firm for alleged illegal behavior related to the crisis. Several state attorneys general are expected to join the case, making it one of the highest-profile and widest-ranging enforcement crisis-era crackdowns.
"The expected civil charges against S&P follow the breakdown of long-running settlement talks between the Justice Department and S&P, the people said.
"Many details of the looming enforcement action couldn't be immediately determined, such as why prosecutors are zeroing in on S&P rather than rivals Moody's Corp. and Fitch Ratings, a unit of Fimalac SA and Hearst Corp."
Update at 2:52 p.m. ET. Without 'Legal Merit':
S&P issued a statement saying a lawsuit from Justice, "would be entirely without factual or legal merit."
The New York Times reports that by bringing a civil suit as opposed to criminal suit, "the Justice Department's burden of proof will be less, perhaps lowering the bar for a successful prosecution."
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