"Although prosecutors have expressed an interest in the subprime matters, the criminal investigations might not result in the filing of any charges. Securities-valuation cases involve a fair amount of judgment based on an opaque market. To bring fraud charges, 'prosecutors need proof beyond a reasonable doubt that the banks made materially misleading statements about securities, and proof that they did it with the intent to deceive,' says Christopher J. Clark [CJC], a New York white-collar lawyer and former [AUSA] in Manhattan in the securities and commodities fraud unit", WSJ, 2 February 2008.
"Federal criminal prosecutors are stepping up their interest in Wall Street's mortgage-securities activities. ... The SEC is examining, among other things, whether [Merrill] booked inflated prices of mortgage bonds it held despite knowledge that the valuations had dropped, [people familiar with the matter] say. ... The interest of the Manhattan U.S. attorney's office follows a series of investigations being pursued by state and federal regulators with criminal and civil enforcement powers around the nation into the financial industry", my emphasis, WSJ, 8 February 2008.
The SEC and (In)Justice Department are "forced" to farm out investigations to private law firms, and Ofheo doesn't want NY's Attorney General investigating mortgage fraud. That's interesting. Think about it. Why would the Feds prefer private law firm investigations to NY's Attorney General? I realize the firms which hire the private law firms are large publicly-held entities. So? I can't believe there isn't a large potential "substititution effect" possible here.
CJC is correct so? Intent is inferred from actions. If the securities were improperly valued, will those who valued them, plead incompetence as a defense? If so, that will leave them open to civil claims. Or will the US Attorney's office for the SDNY let its "alumni network" take care of things and state there is insuffient evidence to prosecute. This after those who got target notices spend fortunes in attorney fees. Stay tuned. See my 31 January 2008 post.
I appreciate our good friend, Mike Garcia, showing "interest" after other state and federal authorities. How nice.