The news just keeps getting worse for Standard & Poor’s Financial Services.

Setting in stone a tentative decision reached last week, a federal judge in Santa Ana, Calif. refused late Tuesday to toss a Justice Department lawsuit accusing S&P of duping investors with inflated credit ratings for financial products backed by subprime securities. U.S. District Judge David Carter rejected arguments by S&P’s lawyers at Cahill Gordon & Reindel and Keker & Van Nest that the company’s statements about the integrity of its rating process are mere “puffery,” allowing the government’s potentially groundbreaking case to move forward.

In its Feb. 4 complaint, the DOJ accused S&P of presenting its ratings as objective and independent even as it catered to the whims of bankers, slapping top ratings on ill-fated securities that helped sink the economy. The DOJ is seeking $5 billion in civil penalties under the Financial Institutions Reform, Recovery and Enforcement Act of 1989, a law passed in the wake of the savings and loan crisis.

Following a July 8 hearing attended by The National Law Journal‘s Amanda Bronstad, Carter issued a tentative order concluding that statements S&P made about its ratings prior to the crash were plausibly relied upon by investors. S&P counsel John Keker had argued that the government’s complaint rested on company statements that amounted to no more than “puffery” under the law. Given the generic nature of S&P’s statements, Keker said, the allegations could pertain to as many as 5,000 securities offerings that S&P rated during in the run-up to the financial crisis. Assistant U.S. attorney George Cardona in Los Angeles countered that investors relied on S&P’s statements as “material and important.”

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