NY Prosecutors Focus in on Wall Street, Lenders in Subprime Probe

The Wall Street Journal reported yesterday that prosecutors in the Eastern District of New York in Brooklyn are stepping up their probe into the subprime-mortgage crisis, focusing on Wall Street firms and mortgage lenders.

Source: Source: Wall Street Journal | Published on May 5, 2008

According to the Journal article, a task force of federal, state and local agencies will look into potential crimes ranging from mortgage fraud by brokers to securities fraud, insider trading and accounting fraud.

The Federal Bureau of Investigation is already targeting major corporate insiders and criminal groups in its investigation of fraud in the mortgage lending industry. The FBI has said it is investigating 19 companies in mortgage cases.

The formation of the task force amplifies efforts already under way in Brooklyn, where prosecutors are investigating whether investment bank UBS AG improperly valued its mortgage-securities holdings, the report said.

Also being investigated are the circumstances surrounding the failure of two hedge funds at Bear Stearns, which collapsed last summer because of losses tied to mortgage-backed securities, the report said.

Separately, the New York Times said the FBI and the criminal division of the Internal Revenue Service had formed a task force to examine mortgages that were made with little or no proof of the earnings or assets of borrowers.

The group also includes federal prosecutors in New York, Los Angeles, Philadelphia, Dallas and Atlanta, the Times said, citing an unidentified official.