The Justice Department, which accused S.&P. of inflating the ratings of mortgage investments that spurred the 2008 financial meltdown, sent so many prosecutors to the negotiation that they formed an overflow row behind a conference room table. The Connecticut attorney general, George Jepsen, made the trip to Washington — his office was one of the first to sue S.&P. — as did the attorneys general from Illinois and Tennessee and lawyers from the United States attorney’s office in Los Angeles. The Mississippi attorney general dialed in remotely from an impromptu hunting trip.
While the agencies eventually reached an agreement with S.&P. — a $1.37 billion settlement that is expected to be announced on Tuesday — they spent that day in January ticking off their demands, one after another.
One condition was personal: Retract your claim that the Justice Department’s lawsuit was “retaliation” for S.&P.’s decision to cut the credit rating of the United States in the summer of 2011.
“There is a great deal of cynicism about the functioning of government, and it’s very important that this case not add to that cynicism,” said Stuart F. Delery, a senior Justice Department official, according to people who attended the negotiation in his conference room (an expansive chamber appointed with paintings of past Justice Department officials). Outnumbered and eager to settle, the S.&P. lawyers agreed to walk back their claims.
That concession formed one element of the broader settlement expected on Tuesday that will close the book on the Justice Department’s case and lawsuits from 19 state attorneys general.
An account of the two-year fight that led to the settlement, assembled through interviews with the people who attended the talks, tells the story behind one of the government’s signature Wall Street cases. The lawsuits generated years of animosity, the interviews show, that eased only after management changes at S.&P. and the Justice Department allowed both sides to reconsider their bargaining positions.
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Ultimately, a compromise emerged: S.&P. would acknowledge that, based on all the evidence it reviewed thus far, there was nothing to support retaliation. The statement would not address whether additional depositions would have yielded a different conclusion.
At last, a deal was in hand. While most lawyers scrambled to catch planes, two lawyers from Connecticut, Mr. Budzik and his colleague George O’Connell, hung back. Haggard from a sleepless night, they shook hands and headed for a local bar.
A version of this article appears in print on 02/03/2015, on page B1 of the NewYork edition with the headline: Uneasy Pact, for Agencies and for S.&P..
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