Subprime Probes Slowed By Complexity
Washington Post staff writer Carrie Johnson reported on February 14, 2008 that the probes by investigators into dozens of companies for fraud and insider trading in connection with the subprime mortgage crisis are progressing slowly. The FBI currently has 16 criminal investigations pending while the Securities and Exchange Commission is investigating close to 24 additional companies. Attorneys general in at least four states have issued subpoenas and private class-action lawsuits have been filed targeting banks, homebuilders, lenders, and credit-rating agencies.
FBI section chief Sharon E. Ormsby said that policing mortgage and credit-related fraud is the FBI Financial Crimes Unit’s "number one priority." The SEC has since assigned 100 lawyers to participate in a nationwide subprime mortgage-working group, which has made criminal referrals to other government agencies. Part of the challenge of these investigations is that they concern complex accounting and business decisions and investigators must sift through mountains of paperwork and trading records.
Accordingly, investigators are looking for the most blatant misconduct such as executives at lenders, builders and investment banks unloading shares of stock in advance of bad news or corporations that keep two sets of books. A major question is whether sky-high valuations and delayed announcements of big losses in mortgage investments were part of a pattern of deceit intended to improve financial results.
The SEC is looking at whether the firms were using different models to price the securities on their own books versus those in customer accounts. Assistant Regional Director Doria Bachenehimer of the SEC’s New York office asked the pertinent question: “Is the bank giving itself better prices than it’s giving its own clients?”
The SEC will have an answer to that question before it is finished.
Page Perry, LLC is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 30 occasions. Page Perry’s attorneys are actively involved in counseling investors regarding their subprime investment problems and have brought claims for investors with losses relating to subprimes. For further information, please contact us.
