CrimProf Blog

Editor: Kevin Cole
Univ. of San Diego School of Law

Wednesday, September 24, 2008

FBI Opens Probe of Finance Giants

The FBI is investigating whether fraud played a role in the troubles at Fannie Mae, Freddie Mac, Lehman Brothers and American International Group, bringing to 26 the number of bureau investigations of institutions tied to the mortgage debacle, according to two sources familiar with the developments.

At the same time, the Securities and Exchange Commission has opened more than 50 investigations into disclosure and valuation of housing-related investments at banks, insurers and credit-rating agencies, Chairman Christopher Cox told the Senate Banking Committee yesterday.

The wide-ranging probes are operating at different stages of development and no charges are imminent, according to sources, who spoke on condition of anonymity because they were not authorized to discuss the issue.

A half-dozen current and former government lawyers cautioned that mortgage-related cases presented significant challenges for investigators because of their complexity, which they said surpassed even the five-year-long probe into wrongdoing at Enron.

"The reason is they involve securities . . . that are all but incomprehensible even to sophisticated investors," said Timothy J. Coleman, a former Justice Department official who oversaw the government's corporate fraud task force. "The other problem is that there is no obvious crime that was committed here. It may be that people who invested in these mortgage securities misunderstood the risks. But it's not at all clear they were the result of a misrepresentation." [Mark Godsey]

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