As turmoil in the financial markets has intensified, both companies and individuals are increasingly being investigated for criminal securities fraud and other unlawful activity associated with recent market volatility. The staggering scale of government intervention— particularly the $700 billion rescue package— has prompted calls for increased regulation, investigation, and accountability. Regulators and enforcement officials have in fact undertaken numerous investigations aimed at addressing any fraud or other legal violations and assuaging public demand for accountability.
At the epicenter of the crisis, Fannie Mae and Freddie Mac recently indicated that they received subpoenas from the U.S. Attorney’s Office for the Southern District of New York. The mortgage giants were subpoenaed as part of a federal grand jury investigation into their accounting, which arose in the wake of their recent government takeover. The SEC is also investigating both companies and has directed them to preserve all relevant records. In addition to its investigations of Fannie and Freddie, the SEC has initiated as many as 50 other investigations related to recent financial market events.
Likewise, the FBI is not only investigating Fannie Mae, Freddie Mac, Lehman Brothers, and AIG in connection with their recent failures and/or takeovers, but is also probing 26 cases of potential corporate fraud related to the collapse of the U.S. mortgage lending industry.
Some companies are also facing congressional investigations. For instance, congressional leaders recently called for the establishment of a task force to investigate Fannie Mae and Freddie Mac. Other companies being investigated by one or more enforcement agencies for activities related to the market turmoil include Credit Suisse, Countrywide Financial, UBS, New Century Financial, Lehman Brothers, and Bear Stearns.