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WDKX.com » Blog » Feds Say JPMorgan Broke Securities Laws In Mortgage Deals
Aug 8th 2013 6:08 am
Feds Say JPMorgan Broke Securities Laws In Mortgage Deals

FORTUNE -- The Justice Department has concluded that JPMorgan Chase broke federal securities law in connection with sub-prime and Alt-A mortgage bonds that the firm sold between 2005 and 2007.

The bank disclosed that it had received the notice of violation in May on Wednesday in its regular quarterly earnings filing with the Securities and Exchange Commission. The bank, which is the largest in the U.S. in terms of assets, also said its mortgage operations are under investigation by both the civil and criminal divisions of the Justice Department.

JPMorgan (JPM) said the Justice Department's determination was still preliminary and that it came from the civil investigation. The bank has not been charged with civil fraud, and it's unclear whether criminal charges are pending. JPMorgan declined to comment beyond what it had said in its securities filing.

The Justice Department has been looking for a while into whether investment banks in the run up to the housing bust mislead investors about the quality of the home loans that were backing the bonds the banks were selling.

On Tuesday, the Justice Department brought a civil suit against Bank of America (BAC), saying that bank had defrauded investors in an $850 million mortgage bond deal that was backed by jumbo home loans and sold by the bank in 2008. U.S. Attorney General Eric Holder said in a statement that the Bank of America case "marks the latest step forward in the Justice Department's ongoing efforts to hold accountable those who engage in fraudulent or irresponsible conduct," and that "President Obama's Financial Fraud Enforcement Task Force" is proceeding with "a range of additional investigations." A Justice Department spokesperson could not be reached for comment on its potential charges against JPMorgan.

Earlier this year, the Justice Department sought documents from JPMorgan related to mortgage bonds that were underwritten by Bear Stearns, which JPMorgan acquired in early 2008. JPMorgan's disclosure on Wednesday did not say whether the deals in question had been completed by Bear or JPMorgan.