Justice Department Reviewing SEC Case Against Goldman Sachs

Officials at the U.S. Department of Justice are reviewing whether the Securities and Exchange Commission's recent fraud charges against Wall Street giant Goldman Sachs warrant a full-scale criminal investigation, two government sources told ABC News.

It's unclear what specific deals or which Goldman Sachs employees are part of the Justice Department's review and whether criminal charges will ever be filed. The Wall Street Journal reported today that the federal prosecutors were investigating whether Goldman employees committed securities fraud in connection to the firm's mortgage trading.

Goldman spokesman Michael Duvally declined to confirm the Justice Department's involvement, as first reported by the Journal.

"Given the recent focus on the firm, we are not surprised by the report of an inquiry. We would fully cooperate with any requests for information," he said.

The Journal described the department's review as an investigation that is in a "preliminary stage" based out of the Manhattan U.S. Attorney's Office.

The SEC filed a civil lawsuit against Goldman two weeks ago, alleging that the firm defrauded its investors.

The SEC's claim states that Goldman Sachs structured a collateralized debt obligation (CDO) -- an instrument tied to the performance of certain securities -- that was secretly designed to fail and that the firm failed to disclose that to its investors. Paulson & Co., the hedge fund that helped pick the investment's portfolio of securities that were linked to mortgages, later made $1 billion by betting against the deal.

Goldman has denied the charges. Fabrice Tourre, a 31-year-old executive director in Goldman's London office, is the only individual defendant named in the SEC's suit.

Tourre's lawyer did not immediately return calls for comment on Thursday.

The SEC declined to comment.

It is common for Justice officials to review SEC lawsuits for potential criminal charges. After the SEC filed civil charges last June against Angelo Mozilo and two other former executives at mortgage giant Countrywide -- allegations that Mozilo's lawyer denied -- federal criminal investigators began calling witnesses before a grand jury in the case, the Wall Street Journal reported. No criminal charges have been filed in that case to date.

News of the Justice Department review in the Goldman case comes days after a marathon hearing before a Senate subcommittee that grilled several current and former Goldman Sachs executives, including Tourre and Goldman CEO Lloyd Blankfein.

Senators on the panel blasted Goldman for allegedly exploiting the housing bubble to make huge profits, a charge Goldman officials denied. Goldman also faced heat over e-mails revealed by the committee in which employees referred to a product they were selling as a "sh**ty deal."

Tourre, who has garnered infamy for playfully-worded e-mails about the deal in question -- including one in which he referred to himself as the "fabulous Fab" -- maintained during the hearing that he was innocent.

"I deny -- categorically -- the SEC's allegation," Tourre said. "And I will defend myself in court against this false claim.

"The last week has been challenging for me and my family," he said, "as I have been the target of unfounded attacks on my character and motives. I appreciate the opportunity to appear before the subcommittee to answer these false charges. I wish to repeat -- I did not mislead IKB or ACA, two of the most sophisticated institutional investors in these products anywhere in the world."

Blankfein called the day the SEC announced the charges "one of the worst days" of his professional life and said the bank has to do "a better job of striking the balance between what an informed client believes is important to his or her investing goals and what the public believes is overly complex and risky."

"While we strongly disagree with the SEC's complaint, I also recognize how such a complicated transaction may look to many people," he said. "To them, it is confirmation of how out of control they believe Wall Street has become, no matter how sophisticated the parties or what disclosures were made. We have to do a better job of striking the balance between what an informed client believes is important to his or her investing goals and what the public believes is overly complex and risky."

ABC News' Zunaira Zaki, Dan Arnall and Matthew Jaffe contributed to this report.

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