Legal News

EDNY Forms Federal Task Force to Clean Up Mortgage Mess

By Dan Slater

Over a year ago, the Law Blog began chronicling how the mortgage meltdown was becoming the latest Full Employment Act for Lawyers (see here, here and here.) To be sure, the subprime litigation boom has been a boon for litigators — last year saw 278 lawsuits filed in federal courts — and now prosecutors are taking on the mortgage mess as well.

Today, Law Blog colleague Amir Efrati reports that prosecutors in the Brooklyn-based Eastern District of New York have formed a task force of federal, state and local agencies, involving as many as 15 law-enforcement agents and investigators that will focus on Wall Street firms and mortgage lenders.

Benton J. Campbell, the U.S. attorney for the office who supervises about 150 prosecutors, said that, while the “jury is still out” on just how much criminal activity the office might find, the newly-formed task force will look into potential crimes ranging from mortgage fraud by brokers to securities fraud, insider trading and accounting fraud. “There are market forces in play in that area, and that doesn’t necessarily mean there is fraud,” said Campbell.

According to the WSJ, the investigations into mortgage lenders focus on whether officials made misrepresentations in securities filings about a company’s financial position and the quality of its mortgage loans, including failing to disclose a rising number of loan defaults, or engaged in questionable accounting to hide losses. Prosecutors also are looking at whether companies doctored information about borrowers, such as credit histories, before making loans and selling those loans to banks or Wall Street firms, which packaged them into securities and sold them to investors.

AUSA Jonathan Green will lead the task force, which had its first formal meeting Friday. It also includes officials and agents from the FBI’s financial-institutions fraud unit known as C3; the U.S. Postal Inspection Service; financial-crimes investigators from the U.S. Secret Service; and investigators and representatives of the New York State Banking Department, the New York City Department of Investigation and the Federal Deposit Insurance Corp.

Full post as published by Law Blog - WSJ.com on May 05, 2008 (boomark / email).