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FBI Conducting Criminal Investigations of Mortgage, Banking Firms

By Jeralyn, Section Crime in the News
Posted on Tue Sep 23, 2008 at 10:29:03 PM EST
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42 FBI task forces around the country are investigating some of the top mortgage firms, including Fannie Mae and Freddie Mac for fraud. AIG and Lehman Bros. are also subjects of the investigation.

The FBI says it has opened 36 investigations so far. As to what's under investigation:

Sources tell ABC News the investigations are looking into whether company officials systematically misled investors about the financial strength of their institutions.

FBI Director Robert Mueller testified about the investigations on Sept. 16 at a House Judiciary Committee meeting. One of the areas under investigation: whether the companies misstated their assets. From the transcript (available at Lexis.com)

On the one hand -- as I indicated before, we're looking brokers and appraisers, buyers and lenders at the local level, but we also have 24 investigations that are looking at corporations -- large corporations, where the allegations would be that there were misstatement of assets. So, we're looking at it from the large corporation perspective as well as various schemes that were undertaken at the local level.

...As I've said, we've had in the last two years, I think, more than 500 indictments. I'm not certain of the actual number of convictions, but -- and we currently have 1,400 cases of the state, the local variety, and 24 cases of the corporate variety.

...we've had a number of prosecutions over the last two years, in excess of 500, of a variety of mortgage fraud schemes that preyed on unwitting consumers and others. So, yes, around the country, particularly in those pockets where the sub prime mortgage crisis is most affecting the community is where may of these investigations reside. We also, as I indicated earlier have a number of investigations going against financial institutions who may well have misrepresented their assets in the course of filings and otherwise. So we're looking at it from both the top as well as those schemes at what would be the bottom of the pyramid and we're doing it in 42 task forces around the country and on those 42 task forces will be agents and specialist and experts from a variety of federal agencies as well as from state local law enforcement and then we will choose the particular jurisdiction in which to file the case depending on the circumstances of the case.

Since last week, the number of investigations has changed from 24 to 26. ABC News reports:

FBI spokesman Richard Kolko added to Mueller's figure, saying in a statement to ABC News that "the FBI currently has 26 pending corporate fraud investigations involving subprime lenders. As we have seen, this number can fluctuate over time; however, we do not discuss which companies may or may not be the subject of an investigation."
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    FBI Conducting Criminal Investigations of Mortgage, Banking Firms | 12 comments (12 topical)

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    this is who we want to bail out? (5.00 / 2) (#1)
    by coigue on Tue Sep 23, 2008 at 10:47:40 PM EST


    nicely done (5.00 / 1) (#10)
    by Jlvngstn on Wed Sep 24, 2008 at 09:10:44 AM EST
    :)

    Parent
    Question, Jeralyn (5.00 / 1) (#2)
    by dissenter on Tue Sep 23, 2008 at 10:55:49 PM EST
    Legal question. If most of the leveraged sub prime debt was sold fraudulently, couldn't someone bring a criminal case against these investment banks and some government authority cancel the debt on the grounds they weren't legal transactions?

    I think Roosevelt did something like that when he took office but I don't remember the specifics.

    Interesting little snippet (5.00 / 1) (#3)
    by nycstray on Tue Sep 23, 2008 at 11:21:13 PM EST
    ...As I've said, we've had in the last two years, I think, more than 500 indictments. I'm not certain of the actual number of convictions, but -- and we currently have 1,400 cases of the state, the local variety, and 24 cases of the corporate variety.

    that's a lot of messed up lives.

    There ought to be a CEO, a hedge-fund manager ... (5.00 / 1) (#6)
    by FreakyBeaky on Wed Sep 24, 2008 at 01:43:52 AM EST
    ... or a Bush Administration official hanging from every lamp post on Wall Street.

    Being a reasonable and humane person, however, I'll settle for prison.

    (Besides, who wants to end up like Robespierre).  

    This is... (none / 0) (#4)
    by CoralGables on Wed Sep 24, 2008 at 12:02:43 AM EST
    exactly why there is no reason to jump in with 700 billion, with no oversight, under pressure from the Bush administration.

    A far better approach is to step back and evaluate the entire problem and handle it with the start of a new president in January. Let's have the decision made by a president that will have to answer to the people rather than one slinking away in 16 weeks.

    Given that (none / 0) (#5)
    by Makarov on Wed Sep 24, 2008 at 12:20:59 AM EST
    a number of those companies are likely insolvent at the moment (by failing to have to written down MBSs and other instruments), then yes, they have probably misled shareholders at the very least. Beyond that, I wonder if there's evidence they conspired with bond rating agencies to defraud investors in the MBSs and CDOs they sold.

    why limit the investigation (none / 0) (#7)
    by Kensdad on Wed Sep 24, 2008 at 05:13:38 AM EST
    to failed companies?  there are plenty of big banks out there still lying not only to mortgage borrowers, but to shareholders about their financial strength and the toxic waste (i.e. bad assets) on their balance sheets.

    Political Side (none / 0) (#8)
    by jarober on Wed Sep 24, 2008 at 05:18:23 AM EST
    It would be useful as well to look into the political pressure that came from people on both sides of the aisle to have lots of risky mortgages made.  I know that both Dodd and Frank have very dirty hands in that arena.  

    Fraud vs collusion (none / 0) (#9)
    by Munibond on Wed Sep 24, 2008 at 06:40:07 AM EST
    A couple of years ago a supposedly massive investigation of securities firms was disclosed by the FBI and SEC relating to widespread collusion in the pricing of derivatives and investment contracts. I don't know where that led, but price fixing would seem to be an easier case than securities fraud.

    a bit late, in my opinion. (none / 0) (#11)
    by cpinva on Wed Sep 24, 2008 at 03:20:17 PM EST
    this is something that should have started years ago, when the sub-prime and derivative frenzy first started rolling.

    if all these companies are massively overstating the values of these assets on their balance sheets, then i should expect a number of cpa firm's head's to roll as well. a fair number of those F/S's were audited, much like enron. they would have been required to review the "mark-to-market" workpapers, supporting the claimed values, as part of the audit, at minimum.

    Thats good (none / 0) (#12)
    by Abdul Abulbul Amir on Wed Sep 24, 2008 at 08:47:10 PM EST

    But are they going to investigate the regulatory approval of the no money down loans that are at the root of this mess.

    FBI Conducting Criminal Investigations of Mortgage, Banking Firms | 12 comments (12 topical)

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