The FBI is reportedly investigating possible accounting fraud and insider trading at 14 companies in the financial services, mortgage lending and investment banking industry.
The investigation of the companies, which were not identified, began in the spring of 2007 and is being conducted jointly with the Securities and Exchange Commission, the Associated Press reported. The SEC is believed to be conducting roughly three dozen investigations related to publicly traded companies in the housing and mortgage lending business, AP said.
New York Attorney General Andrew Cuomo is about one year into an investigation of companies that packaged up bundles of mortgage loans as collateral for securities sold to Wall Street investors.
That investigation centers around whether banks and other companies that sold the securities failed to disclose to investors and rating agencies that some loans did not meet minimum underwriting standards (see Inman News story).
Cuomo sued First American Corp. and its subsidiary eAppraiseIT in November, alleging the companies allowed Washington Mutual loan originators to pressure them into providing inflated property appraisals. WaMu was not named in the suit, and all three companies deny wrongdoing.
The New York attorney general has also subpoenaed government-chartered mortgage repurchasers Fannie Mae and Freddie Mac and other firms involved in bundling mortgage loans as investments.
The FBI is looking for signs of accounting fraud at financial firms that securitize subprime loans or hold them on their books, AP reported, and whether executives engaged in insider trading.
Investment banks Goldman Sachs, Bear Stearns and Morgan Stanley reported Tuesday that they are responding to subpoenas and requests for information from unnamed government regulators and agencies related to the origination, securitization and servicing of mortgage loans, subprime and non-subprime.
In their annual report to investors, Morgan Stanley executives said the company has also been named in lawsuits related to its role as an underwriting of preferred stock offerings by New Century Financial Corp. and Countrywide Financial Corp.
Bear Stearns executives in their annual report said the company is cooperating with requests “from various regulatory and governmental entities relating to subprime mortgages, mortgage securitizations, collateralized debt obligations, and synthetic products related to subprime mortgages.”
Goldman Sachs made a similar disclosure in the company’s annual report, and also noted the firm is the defendant in a Jan. 10 lawsuit by the city of Cleveland alleging that its securitizations of subprime mortgages created a “public nuisance.”