Prosecutors in N.Y. Form Subprime Task Force

NEW YORK -- Federal prosecutors in New York have formed a task force together with other government agencies to examine the collapse of the market for risky home loans, a spokesman for the U.S. Attorney's Office in Brooklyn said on Monday, according to Reuters.

The group is being run out of the federal prosecutors' office in Brooklyn, said Robert Nardoza, a spokesman for the office, formally known as the U.S. Attorney's Office for the Eastern District of New York, Reuters reported.

The U.S. attorney for the office, Benton J. Campbell, who supervises about 150 prosecutors, said the group will look into potential crimes ranging from mortgage fraud by brokers to securities fraud, insider trading and accounting fraud, The Wall Street Journal reported.

The formation of the task force amplifies efforts already under way in Brooklyn, where prosecutors are investigating whether investment bank UBS AG improperly valued its mortgage-securities holdings, as well as the circumstances surrounding the failure of two hedge funds at Bear Stearns Cos., which collapsed last summer because of losses tied to mortgage-backed securities. UBS and Bear Stearns have declined to comment on these investigations, The Journal reported.

Eastern District prosecutors also are investigating potential accounting fraud and false statements, among other things, by current and former executives of American Home Mortgage Investment Corp., a Melville, N.Y., mortgage lender that collapsed last year, according to people familiar with the matter. A spokesman for American Home, once the 10th-largest lender in the country, declined to comment to The Journal.

The task force is working with representatives from the FBI, the U.S. Postal Inspection Service, the U.S. Secret Service, the Federal Deposit Insurance Corp. and the Securities and Exchange Commission, Nardoza said, according to Reuters.

He said the task force is focusing on mortgage activity in the New York area, where many financial services firms are located or do business. It is working with representatives from the New York State Banking Department, New York City's Department of Investigation and the Office of the New York State Attorney General. The task force is also working with federal prosecutors in Manhattan, Nardoza said, according to Reuters.

-- NYSSCPA.org News Staff

Posted on 5/5/08