January 30, 2008
FBI Gets into the Game to Uncover Fraud in Subprime Mortgage Fiasco
You know it has been a bad day when the third government entity is now investigating the subprime mortgage disaster. First it was the SEC, then the Attorney General's office of New York and now the FBI's Economic Crimes unit.
Fraud and insider trading allegations abound. One thing is for sure, some new regulations will come of this one.
Investment Banks and the banks around the world do not look too swift right now. First it was subprime mortgages with no rails and regs and now it is the French bank Societe Generale with the complete failure of controls and key performance indicators.
All I want to know is where were all these regulators before all this happened. There certainly was evidence before the whole thing blew up.
An excerpt from Business Week online: "Fall Guys?
It's not just public company executives who may need to worry about their sales. If, for example, a hedge fund manager pulled his own money out of a fund when he became aware of valuation problems, but left customers in, that, too, could be a problem. "That's not exactly insider trading, but it could involve fraud in connection with the sale of a security," says the investigator.
While there's no way of knowing yet what the probes will turn up, or whether any actions will rise to the level at which criminal intent can be established, Frenkel points out that the involvement of the FBI is not good news for executives at firms where wrongdoing is suspected.
"As we saw in the corporate fraud cases, companies have an incentive to resolve these investigations; that may include the sacrifice of corporate personnel," he says. "People often forget in the early stages of an investigation, their interests and those of a company can diverge. Companies can settle. They don't go to jail, people do."
Fraud and insider trading allegations abound. One thing is for sure, some new regulations will come of this one.
Investment Banks and the banks around the world do not look too swift right now. First it was subprime mortgages with no rails and regs and now it is the French bank Societe Generale with the complete failure of controls and key performance indicators.
All I want to know is where were all these regulators before all this happened. There certainly was evidence before the whole thing blew up.
An excerpt from Business Week online: "Fall Guys?
It's not just public company executives who may need to worry about their sales. If, for example, a hedge fund manager pulled his own money out of a fund when he became aware of valuation problems, but left customers in, that, too, could be a problem. "That's not exactly insider trading, but it could involve fraud in connection with the sale of a security," says the investigator.
While there's no way of knowing yet what the probes will turn up, or whether any actions will rise to the level at which criminal intent can be established, Frenkel points out that the involvement of the FBI is not good news for executives at firms where wrongdoing is suspected.
"As we saw in the corporate fraud cases, companies have an incentive to resolve these investigations; that may include the sacrifice of corporate personnel," he says. "People often forget in the early stages of an investigation, their interests and those of a company can diverge. Companies can settle. They don't go to jail, people do."
