Criminal Probe Targets 6 Wall Street Firms

Thursday, 13 May 2010 09:20 PM

 

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Prosecutors are conducting a broad criminal investigation of six major Wall Street banks, including JPMorgan Chase & Co and Citigroup Inc, to determine if they misled investors, a person familiar with the matter said on Thursday.

The others are Deutsche Bank AG, UBS AG, Morgan Stanley and Goldman Sachs Group Inc, the source said.

The investigation, being conducted with the Securities and Exchange Commission, comes as Wall Street and major banks around the world are attracting scrutiny from regulators who are looking at transactions that occurred in the run-up to the subprime mortgage meltdown and financial crisis.

The source said the investigation includes mortgage-bond deals, that it is in an early stage, and that it might not necessarily lead to criminal charges against all of the firms. The person spoke anonymously because the probe is ongoing.

Separately, New York authorities opened an investigation into whether eight banks, including Citigroup, Goldman Sachs and Morgan Stanley, misled rating agencies with regard to mortgage-derivative deals, a separate source familiar with the matter said on Thursday.

New York Attorney General Andrew Cuomo's office served subpoenas on Wednesday to four U.S. banks and four European lenders, the source said. Cuomo is also targeting Credit Agricole SA, Credit Suisse Groupe AG, Deutsche Bank, UBS and Merrill Lynch, now owned by Bank of America Corp, the second source said.

The companies that rated the mortgage deals were McGraw-Hill Cos Inc's Standard & Poor's, Fitch Ratings, majority-owned by Fimalac, and Moody's Investors Service, a unit of Moody's Corp.

The federal and state probes also come less than a month after the SEC charged Goldman Sachs with civil fraud in connection with its marketing of a subprime mortgage product.

A federal criminal investigation of Goldman was first disclosed on April 30, but it had not been previously known that other major Wall Street companies were under scrutiny as well.

JPMorgan has not been contacted by the Department of Justice or any U.S. attorney's office on these matters and is unaware of any criminal investigation, a spokeswoman said. A spokesman for JPMorgan declined to comment on the SEC investigation.

With regard to the Cuomo investigation, Citigroup spokesman Alex Samuelson said: "We are cooperating with the AG's office."

On the criminal probe, Samuelson declined to comment and referred to the company's most recent quarterly filing with regulators, which says the bank is cooperating with subpoenas and requests for information from the SEC and other government agencies regarding subprime and other matters.

Credit Suisse spokeswoman Victoria Harmon said: "It is our practice to cooperate fully with regulatory authorities."

Morgan Stanley Chief Executive James Gorman said he had no knowledge of any such investigation, the Wall Street Journal reported on Wednesday.

A Credit Agricole official said it had received the Cuomo subpoena and was cooperating, but wouldn't comment on the ongoing matter. Spokesmen for UBS and Deutsche Bank declined to comment.

The other banks did not immediately return messages seeking comment. The Justice Department and the SEC declined comment.

© 2014 Thomson/Reuters. All rights reserved.

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