The Justice Department is investigating whether the nation's largest credit-ratings agency, Standard & Poor's, improperly rated dozens of mortgage securities in the years leading up to the financial crisis, according to two people interviewed by the government and another briefed on such interviews.

The investigation began before Standard & Poor's (S&P) cut the United States' AAA credit rating this month, but it is likely to add fuel to the political firestorm that has surrounded that action. Lawmakers and some administration officials have since questioned the agency's secretive process, its credibility and the competence of its analysts, claiming an error in its debt calculations.

In the mortgage inquiry, the Justice Department has been asking about instances in which S&P analysts wanted to award lower ratings on mortgage bonds but may have been overruled by company executives, according to the people with knowledge of the interviews.

If the government finds enough evidence to support such a case, which is likely to be a civil case, it could undercut S&P's longstanding claim that its analysts act independently from business concerns.

It is unclear if the Justice Department investigation involves the other two ratings agencies, Moody's and Fitch, or only S&P.

During the boom years, S&P and other ratings agencies reaped record profits as they bestowed their highest ratings on bundles of troubled mortgage loans, which made the mortgages appear less risky and thus more valuable.

They failed to anticipate the deterioration that would come in the housing market and devastate the financial system.

The Securities and Exchange Commission (SEC) has been investigating possible wrongdoing at S&P, according to a person interviewed for that matter, and may be looking at Moody's and Fitch Ratings as well.

Ed Sweeney, a spokesman for S&P, said in an email: "S&P has received several requests from different government agencies over the last few years. We continue to cooperate with these requests. We do not prevent such agencies from speaking with current or former employees."

McGraw-Hill

S&P is a unit of McGraw-Hill, which is under pressure from some investors and has been considering whether to spin off businesses or make other strategic changes.

The people with knowledge of the investigation said it had picked up steam early this summer, well before the U.S. debt-rating issue reached a crescendo. Now members of Congress are investigating why S&P removed the nation's AAA rating, which is highly important to financial markets.

Representatives of the Justice Department and the SEC declined to comment on whether they are investigating the ratings agencies.

Even though the Justice Department has the power to bring criminal charges, witnesses interviewed have been told by investigators that they are pursuing a civil case.

The government has brought relatively few cases against large financial concerns for their roles in the housing blowup, and it has closed investigations into Washington Mutual and Countrywide, among others, without taking action.

The cases that have been brought are mainly civil matters. This spring the Justice Department filed a civil suit against Deutsche Bank and one of its units, which the government said had misrepresented the quality of mortgage loans to obtain government insurance on them.

Another common thread — in that case and several others — is that no bank executives were named.

Companies and some countries — but not the United States — pay the agencies to receive a rating, the financial market's version of Good Housekeeping seal. For decades, the government issued rules that banks, mutual funds and others could rely on a AAA stamp for investing decisions — which bolstered the agencies' powers.

A successful case or settlement against a giant like S&P could speed the shift from the traditional ratings system.

The financial overhaul known as Dodd-Frank sought to lessen the emphasis on ratings in the way banks and mutual funds invest their assets. But bank regulators have been slow to spell out how that would work. A government case that showed problems beyond ineptitude might spur greater reforms, financial historians said.

People with knowledge of the Justice Department investigation said references were made to several individuals, though it was unclear if anyone would be named. Investigators have been asking about a remark supposedly made by analyst David Tesher about mortgage-security ratings, two people said.

'Golden goose'

The investigators have asked who heard Tesher say: "Don't kill the golden goose," in reference to mortgage securities.

S&P declined to provide a comment for Tesher.

Several people who oversaw S&P's mortgage-related ratings went on to different jobs at McGraw-Hill, including Joanne Rose, the former head of structured finance; Vickie Tillman, the former head of ratings; and Susan Barnes, former head of residential-mortgage bond ratings. Investigators have told witnesses they are looking for former employees and that has proved difficult because so many crucial people still work at the company.

One former executive mentioned in investigators' interviews is Richard Gugliada, who helped oversee ratings of collateralized debt obligations. Calls to his home were not returned.