Jump to Navigation


Federal Prosecutors Form Subprime Task Force

May 13, 2008

On May 5, 2008, The Wall Street Journal reported that "prosecutors in the Eastern District of New York in Brooklyn have formed a task force of federal, state and local agencies to investigate potential crimes ranging from mortgage fraud by brokers to securities fraud, insider trading and accounting fraud."  "Wall Street, Lenders Face Subprime Scrutiny," The Wall Street Journal.  Coming fast on the heels of stories about the FBI's investigation of improper subprime lending practices, this announcement makes clear that the federal government is gearing up for a major investigative effort.

The task force will likely cast a wide net in its quest to find wrongdoing in the subprime market.  As in past large-scale investigations relating to options back-dating and accounting fraud, we expect that this task force will conduct broad investigations that seek information from virtually every corner of the financial services industry.  Prosecutors will probe not only the propriety of the subprime lenders' own practices, but will also delve into the Wall Street institutions that packaged loans and sold and traded them as securities. 

Subpoenas calling for documents or witnesses could very well find their way into your institution's hands, even if your company is not involved in subprime lending at all.  Should your company receive a subpoena, or be contacted by a law enforcement agency, the prudent course would be to contact counsel to discuss how to respond.