Federal Official Confirms Probe Into Washington Mutual's Collapse

Oct. 15, 2008— -- The federal government is investigating whether the leadership of shuttered bank Washington Mutual broke federal laws in the run-up to its collapse, the largest in U.S. history.

"Due to the intense public interest in the failure of Washington Mutual, I want to assure our community that federal law enforcement is examining activities at the bank to determine if any federal laws were violated," U.S. Attorney Jeffrey Sullivan said in a statement released today.

"For more than 100 years, Washington Mutual was a highly regarded financial institution headquartered in Seattle. Given the significant losses to investors, employees, and our community, it is fully appropriate that we scrutinize the activities of the bank, its leaders, and others to determine if any federal laws were violated," he added. Sullivan is the U.S. attorney for the western district of Washington, which includes Seattle, the home base of the bank, also known as WaMu.

The task force probing the collapse consists of investigators from the FBI, the Federal Deposit Insurance Corporation (FDIC) inspector general's office, the Securities and Exchange Commission and the Internal Revenue Service's criminal investigations division, according to Sullivan's statement. The task force has set up a hotline, 1-866-915-8299, and e-mail account, fbise@leo.gov, for anyone with information.

WaMu did not immediately return phone and e-mail messages seeking comment on the investigation.

Eighty-nine former WaMu employees are confidential witnesses in a shareholder class action lawsuit against the bank, and some former insiders spoke exclusively to ABC News, describing their claims that the bank ignored key advice from its own risk management team so they could maximize profits during the housing boom.

In court documents, the insiders said the company's risk managers, the "gatekeepers" who were supposed to protect the bank from taking undue risks, were ignored, marginalized and, in some cases, fired. At the same time, some of the bank's lenders and underwriters, who sold mortgages directly to home owners, said they felt pressure to sell as many loans as possible and push risky, but lucrative, loans onto all borrowers, according to insiders who spoke to ABC News.