JPMorgan Chase & Co. disclosed that it may become the latest giant bank to face a Justice Department lawsuit over bonds backed by housing-boom loans, and said a parallel criminal investigation is continuing.
Federal prosecutors believe that JPMorgan Chase, the nation's largest bank, violated securities law in its sale of bonds backed by subprime and other high-risk mortgages, the bank said Wednesday in a Securities and Exchange Commission filing.
JPMorgan said the civil division of the U.S. attorney’s office in Sacramento had reached the "preliminary" conclusion that violations took place from 2005 to 2007. Federal prosecutors are conducting a criminal probe of the same mortgage-backed securities offerings, the filing said.
JPMorgan said it also has responded to "a number of subpoenas and informal requests for information from other federal and state authorities concerning mortgage-related matters." Issues included the origination and purchase of loans, underwriting, and the issuance and trading of mortgage-backed securities.
While many observers have deplored the dearth of criminal cases in the aftermath of the mortgage meltdown, authorities have been pursuing civil settlements on many fronts.
JPMorgan's disclosure came one day after the Justice Department and SEC filed securities-fraud lawsuits against the second-largest U.S. bank, Bank of America Corp., in connection with a single mortgage-backed securities deal in 2008.