Looks like the financial crisis is taking the much anticipated criminal turn with the FBI starting to seriously probe allegations of fraud by a number of Wall Street firms whose recent collapses sent markets into turmoil. The ones that received the most media coverage – Lehman Brothers, mortgage giants Fannie Mae and Freddie Mac and insurer AIG – are big targets in the FBI’s wide-reaching inquiry. This news comes on the heels of the $US700 billion government bailout of the troubled financial sector.
The FBI probe aims to determine whether company executives had any responsibility for the institutions’ financial woes through misinformation or material misinformation. FBI Director Robert Mueller said last week that the bureau was probing 24 to 26 financial institutions, but gave no details other than to describe them as “large corporations” that may face allegations of misstated assets. ABC News said the probe was “multifaceted and the net is much deeper than the major firms officials confirmed today,” adding that the probe had expanded from 14 major firms to 26 in less than a year.
Have your say: Do you think the FBI will lay criminal charges against any senior company executives, and which companies are most at risk for criminal behavior?
I’ll start the ball rolling by saying that AIG is the company most at risk simply because of their size and lax regulation, but I do feel the probes should also extend to people and companies that purposely pushed bad news (on CNBC especially) about firms they had short sold, so that when the company stock fell they profited handsomely. Also, due to the complex nature of the investigations and the number of people involved it will be very hard to make serious allegations stick to specific individuals. Jail time also seems unlikely for a number of already fired CEO’s and more likely the penalties will be financial in nature since “everybody was doing it” [poor financial risk management]. Don’t look for any types of charges to be announced anytime soon though if current proceedings (e.g. investigations into mortgage giant Countrywide) are any guide. It could be years before investigations are concluded and until then we will just have to wait and see what happens as this drama unfolds. Should spawn a whole series of books/movies on this topic which could make interesting reading/viewing.Critics have complained that AIG and several other collapsed companies hid the extent of their deepening financial problems from regulators and investors by understating excessive debt and risky investments. The Washington post reports that the wide-ranging financial probes are operating at different stages of development and no charges are imminent, according to sources.