FBI`s Subprime Crackdown May Expand to More Firms

By Reuters -  |  Posted 2008-01-30

WASHINGTON (Reuters) - The FBI's investigation of 14 corporations in a crackdown on improper subprime lending could expand to other companies, but the complex probes may take some time before any charges are brought, a federal law enforcement official said on Wednesday.

"Like any white-collar crime investigation, these are very complicated, time-consuming investigations involving the examination of numerous records and interviews of various people. They don't happen in a short period of time," the FBI official said.

The official said criminal charges were not imminent in any of the investigations, and was unable to predict how long the investigations would take. A Justice Department spokesman declined to comment when asked when charges might be announced.

FBI officials told a briefing on Tuesday the investigations covered corporations across the financial services industry, ranging from mortgage lenders and investment banks to developers and subprime lenders.

They said the investigations involved possible accounting fraud, insider trading and other violations of criminal law.

FBI spokesman Bill Carter said on Wednesday that the first investigations began early last year, that two more investigations recently were opened, and that more companies could be probed.

Carter declined to identify any of the companies under investigation. He said the FBI was working closely with the Securities and Exchange Commission in some of the investigations.


The SEC has opened about three dozen civil investigations into the subprime market collapse.

Targets of the SEC probe include Swiss bank UBS AG and U.S investment banks Morgan Stanley, Merrill Lynch, Bear Stearns, as well as bond insurer MBIA.

The SEC, which has formed an internal subprime mortgage task force, is looking at how financial firms priced mortgage-based securities and whether they should have told investors earlier about the declining value of those securities.

Jacob Frenkel, a former SEC enforcement official and criminal prosecutor who now handles white-collar criminal matters in private practice, said the investigations would take time.

"First, the commission is not going to pull the trigger and bring a case until it is satisfied that there is a provable violation of law," Frenkel said. "The arrival on the scene of the Department of Justice could alter the timetable."

The U.S. attorney in Brooklyn, New York, and the FBI earlier launched a criminal investigation into two mortgage-related hedge funds at Bear Stearns that collapsed last year.

Carter said the FBI around the country has 34 mortgage fraud task forces and working groups that include other federal agencies and state and local law enforcement officials.

"We consider it a significant and growing crime problem," he said.

(Additional reporting by Randall Mikkelsen, Karey Wutkowski and Rachelle Younglai)

(Reporting by James Vicini; Editing by Xavier Briand)

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