WASHINGTON(BullionStreet): US Department for Justice on Tuesday launched a civil claim against S&P and parent McGraw-Hill over its rating of mortgage bonds and is seeking a huge fine.

The move marks the first enforcement action against a credit rating agency over alleged illegal behaviour tied to the financial crisis and could trigger a wave of lawsuits from other investors.

The US government is taking the ratings agency to court over the toxic subprime sludge given gold-plated ratings in the run-up to the financial crisis.

The Justice Department in it's law suit said considerations regarding fees, market share, profits, and relationships with issuers improperly influenced S&P’s rating criteria and models.

A civil claim has a lower burden of proof, increasing the chances of a result. Investment banks paid S&P, as well as other agencies Moody’s and Fitch, millions of dollars for rating an alphabet soup of complex financial instruments left nearly worthless by the crash.

The legal action will further sour relationships with the US government, which S&P stripped of its AAA rating in 2011.

Talks over a $1 billion settlement collapsed last week, according to reports.

However, S&P said the lawsuit was “entirely without factual or legal merit and the DoJ would be wrong in contending that S&P ratings were motivated by commercial considerations and not issued in good faith.