The Justice Department has brought civil fraud charges against Standard & Poor’s, alleging that the nation’s largest credit-ratings agency knowingly understated the risk behind many of the financial products that caused the subprime mortgage meltdown.

The 124-page complaint, filed Monday, comes amid recent criticism of the government’s response to the financial crisis. Last week, for example, two U.S. senators wrote to Attorney General Eric Holder questioning what steps federal prosecutors have taken to hold Wall Street accountable.

In some ways, the S&P lawsuit mirrors many of the cases that have emerged since the Lehman Brothers collapse in 2008. No individuals were charged in the complaint, and the lawsuit pursues civil penalties, rather than criminal charges. At the same time, though, the case marks several important shifts for the Justice Department. Here are a few of the highlights:

A $5 billion case?

The largest penalty to stem from the financial crisis is the $550 million settlement that Goldman Sachs agreed to in 2010 with the Securities and Exchange Commission. The S&P case may easily dwarf that amount. The New York Times reported that settlement talks between the government and S&P broke down after prosecutors sought a penalty in excess of $1 billion.

At a press conference Tuesday announcing the charges, the attorney general told reporters S&P could now be liable for as much as $5 billion. Holder said that amount is equal to the losses suffered by federally insured financial institutions as a result of the firm’s alleged misconduct.

Admitting wrongdoing

A common denominator in financial crisis cases to date has been that firms and individuals have not been forced to admit wrongdoing. According to the Times, the S&P case appears to mark a change in direction for the Justice Department:

S&P also sought a deal that would allow it to neither admit nor deny guilt; the government pressed for an admission of guilt to at least one count of fraud … S&P told prosecutors it could not admit guilt without exposing itself to liability in a multitude of civil cases.

Ratings agency in the spotlight

Unlike past financial crisis cases — which have mostly targeted loan originators and a handful of Wall Street banks — the S&P suit represents the first federal enforcement action against one of the three major credit ratings agencies.

S&P, Fitch Ratings, and Moody’s Corp. are typically paid by the same financial firms that issue the securities they’re assessing. A 2011 Senate report (pdf) on the crisis called that model “a conflict of interest problem that results in a race to the bottom – with every credit rating agency competing to produce credit ratings to please its paying clients.”

The Justice Department echoed that charge in its complaint.

“As S&P knew, contrary to its representations to the public, S&P’s desire for increased revenue and market share in the RMBS and CDO ratings markets, and its resulting desire to maintain and enhance its relationships with issuers that drove its ratings business, improperly influenced S&P to downplay and disregard the true extent of the credit risks,” according to the complaint.

In a statement, S&P called the case “meritless.”

“Although we deeply regret that these 2007 CDO ratings did not perform as expected, 20/20 hindsight is no basis to take legal action against the good-faith opinions of professionals,” according to S&P. “The fact is that S&P’s ratings were based on the same subprime mortgage data available to the rest of the market — including U.S. Government officials who in 2007 publicly stated that problems in the subprime market appeared to be contained.”

While the Senate investigation criticized all three major ratings firms for stirring an “economic earthquake,” Justice Department officials would not comment Tuesday on whether they plan to bring charges against Moody’s or Fitch.

A comeback for FIRREA

The DOJ’s case marks a comeback of sorts for a legal statute that emerged from a past financial crisis: The Financial Institutions Reform, Recovery, and Enforcement Act. FIRREA, as the statute is known, was passed in the wake of the savings and loan crisis as vehicle for prosecuting individuals who defrauded federally insured deposit institutions.

FIRREA allows the government to pursue civil charges for a range of violations typically addressed through criminal statute, including mail fraud, wire fraud and bank fraud. But unlike criminal cases, which require prosecutors to establish guilt beyond a reasonable doubt, FIRREA cases only require guilt be established by a preponderance of the evidence.

Among the federally insured institutions named in the case is the now defunct Western Federal Corporate Credit Union (WesCorp). In March 2007, S&P gave one of its highest ratings to a $550 million security called Sorin CDO VI, Ltd. After Sorin defaulted in May 2008, WesCorp’s investment in the CDO resulted in losses of $90 million.

After S&P

Despite the differences in the S&P complaint, it remains hard to tell whether the case signals the start of a more aggressive push by the Justice Department in the area of white collar crime. Moreover, say critics of the Justice Department, it’s a case that should have been brought sooner than it has.

“This is not the fourth quarter of a football game with a scoreboard and a clock running out,” said Jeff Connaughton, author of The Payoff: Why Wall Street Always Wins.

As the chief of staff to former Sen. Ted Kaufman (D-Del.), Connaughton helped organize Congressional oversight of Wall Street from 2009 to 2010. “All along,” Connaughton said, “the Justice Department should have been active, creative and aggressive about bringing cases where wrongdoing occurred. Because it’s clear the Department failed for years to make these investigations the priority they deserved, I never know whether to applaud a new case or be somewhat suspicious the Department hopes to score just enough points to manage public perception.”

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