The U.S. Justice Department is seeking a trial in February 2015 in its lawsuit against McGraw Hill Financial Inc.’s Standard & Poor’s unit over ratings on residential mortgage-backed securities.

A jury trial on liability would take an estimated 54 days, according to a joint filing today by the Justice Department and S&P in federal court in Santa Ana, California. The Justice Department wants a separate penalty phase to be decided by U.S. District Judge David Carter without a jury.

The government seeks more than $5 billion in penalties from S&P, according to the filing.

S&P is accused in the lawsuit of deceiving investors, including federally insured financial institutions, by giving its highest credit ratings to mortgage-backed securities and collateralized-debt obligations because it wanted to gain business from the issuers of the securities and not because the securities merited these ratings.

In today’s filing, S&P said the Justice Department’s complaint only includes about $500 million in purported losses. The government’s calculation of the remaining $4.5 billion raises more questions than it answers, S&P said.

“For example, 89 percent of the purported losses that the government believes it can use to set a penalty are attributed to Bank of America and Citibank, two of the major institutions responsible for arranging the very CDOs and RMBS at issue, not unsuspecting ‘victims’ of a fraudulent scheme,” S&P said.

July Argument

S&P lawyers are scheduled to argue at a July 8 hearing in Santa Ana that the U.S. claims should be dismissed.

Banks create collateralized debt obligations by bundling bonds or loans into securities of varying risk and return. They pay ratings firms for the grades, which investors may use to meet regulatory requirements.

In its 119-page complaint, the Justice Department cited meetings, messages and memos that it said showed S&P analysts assigned investment-grade ratings to securities based more on a desire to win business than to be accurate.

The case is U.S. v. McGraw-Hill Cos., 13-cv-00779, U.S. District Court, Central District of California (Santa Ana).

–Editors: Michael Hytha, Peter Blumberg