UPDATE: FBI: Mortgage-Fraud Probe Includes Large Companies
Thursday June 19th, 2008 / 23h35
(Updates charges against former hedge fund managers in seventh paragraph, adds states with high fraud in last paragraph.) By Judith Burns Of DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- U.S. authorities are investigating some "relatively large corporations" as part of a sweeping probe of fraud related to mortgage lending, Federal Bureau of Investigation Director Robert Mueller said Thursday. Some 19 companies - including mortgage lenders, investment banks, hedge funds, credit-rating agencies and accounting firms - are being examined, federal officials said at a press conference Thursday. Mortgage fraud is "an area that we are going to aggressively pursue," said Deputy Attorney General Mark Filip. He declined to say if rating firms or others are targets of the investigation, but noted "there's no specific group we're targeting." Filip also said he couldn't discuss the level of cooperation being provided to federal investigators in the investigation. The Justice Department and FBI officials sought to demonstrate progress in the mortgage-fraud fight on Thursday, announcing that roughly 400 individuals have been criminally charged for their roles in home-lending schemes, with 60 arrested on Wednesday alone. Real-estate developers, brokers, agents and appraisers were among those charged, along with lenders, lawyers and so-called straw buyers, said Sharon Ormsby, a section chief for financial crimes in the FBI's criminal investigation division. "Operation Malicious Mortgage" swept up criminal investigations from March 1 through mid-June, and produced 144 cases nationwide. FBI officials estimate the losses from the alleged scams reached $1 billion. Separate criminal indictments announced in New York on Thursday against two former Bear Stearns & Co. managers alleged they deceived investors about hedge funds that ultimately collapsed, causing more than $1 billion of losses. "The investigation continues" into the Bear Stearns matter, said Filip. Mortgage-fraud cases are on the rise. Mueller said the number of investigations has jumped two or three times prior levels, with 1,400 investigations now under way, involving everything from accounting fraud to insider trading. "We will investigate, we will prosecute and we will bring those individuals to justice," seeking prison terms where appropriate, Muller said. Although mortgage frauds are occurring nationwide, federal officials identified 10 "hot spots:" California, Colorado, Florida, Georgia, Illinois, New York, Michigan, Minnesota, Ohio, and Texas. Other emerging trouble spots include Nevada, New Jersey and Virginia. -By Judith Burns, Dow Jones Newswires; 202-862-6692; Judith.Burns@dowjones.com
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