FBI Subprime Mortgage Probe Expands
More companies are under investigation as troubles mount for Bear Stearns.
March 19, 2008 — -- Criminal investigations have been launched against 17 companies in the fallout of the subprime mortgage collapse, the FBI disclosed late Tuesday.
The list of corporate fraud investigations focused on subprime mortgage lending practices by major banks and companies has grown since January, when the bureau announced a probe of 14 mortgage lenders.
While the bureau will not comment on the companies that are under investigation, two Justice Department officials confirmed to ABC News reports in last week's Wall Street Journal that Countrywide Financial is under investigation.
FBI and Justice Department officials declined to comment on any open cases after the recent troubles of investment bank Bear Stearns, which JPMorgan Chase bailed out earlier this week by purchasing the company.
But in an interview with the Reuters news service Tuesday, Neil Power, section chief of the FBI's Economics Crimes Unit, alluded to a possible probe, saying, "Common sense would indicate that we would look at something that big."
"The problem is that banks weren't doing their due diligence," Power said.
Although Justice Department officials declined to specifically address a possible Bear Stearns inquiry, the investment bank noted in a Jan. 29 filing with the Securities and Exchange Commission that federal investigators were looking at the operations of its hedge funds, which heavily invested in subprime lending and debt obligations.
The filing noted that Bear Stearns "has also been contacted by and received requests for information and documents from various federal and state regulatory and law enforcement authorities" about one such fund, which both the Justice Department and the Massachusetts Secretary of State's Office are investigating.
"The company has received requests for information from various regulatory and governmental entities relating to subprime mortgages, mortgage securitizations, collateralized debt obligations and synthetic products related to subprime mortgages. The company is cooperating with the requests," the documents said.
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