US prosecutors and the Securities and Exchange Commission are cooperating in a preliminary criminal probe into whether banks misled investors about their participation in mortgage-bond deals, the Wall Street Journal said, citing a person familiar with the matter.
JPMorgan Chase & Co, Deutsche Bank AG, UBS AG and Citigroup Inc have received civil subpoenas from the SEC, the newspaper said today. Goldman Sachs Group Inc and Morgan Stanley are already being investigated under similar preliminary criminal scrutiny, the Journal said. Separately, New York Attorney General Andrew Cuomo is probing eight firms over whether they misled rating companies, the New York Times said. Wall Street firms are facing scrutiny from prosecutors and lawmakers over whether they improperly sold collateralised debt obligations linked to the subprime mortgages that caused the credit crisis. Goldman Sachs is contesting a lawsuit from the SEC, which alleges the firm misled investors about a mortgage- linked security in 2007.
Prosecutors so far are gathering evidence and haven’t issued criminal subpoenas, or determined the outlines of any potential case, according to the Journal. To win a criminal case, the prosecutors would have to prove beyond a reasonable doubt that a firm or its employees intentionally misled investors, it reported.
Banks respond
Chris Cockerill, a Hong Kong-based spokesman for UBS, and James Griffiths, a spokesman for Citigroup, declined to comment on the Journal article when contacted by Bloomberg News. Fiona Laffan, a spokeswoman for Goldman Sachs in London, and Michael Golden, a London-based spokesman at Deutsche Bank, also declined to comment.