It’s always seemed to me that prosecutors could have a field day looking at what executives at the big investment banks (and commercial banks) were doing as things started to fall apart in 2007 and 2008 — cashing out their own holdings and finding chumps to buy stuff that was plummeting in value, even if many folks didn’t realize it yet.
Seems like maybe Lehman is first up. From the Journal …
The Justice Department has questioned several former executives at Lehman Brothers Holdings Inc. as part of its criminal investigation into whether they sold supposedly safe, liquid securities to clients while knowing that the market for the securities was drying up.
Prosecutors from the U.S. attorney’s office in Brooklyn and lawyers from the Securities and Exchange Commission in recent weeks interviewed several former executives who ran Lehman’s auction-rate-securities business, these people said.
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The inquiry centers on whether Lehman employees defrauded customers as the market for these securities broke down in 2007. Authorities want to know if Lehman executives got these auction-rate securities off the firm’s books and into client accounts at a time in which the securities were becoming hard to sell, according to the people with knowledge of the matter.
Authorities also want to know if executives knew the market was in trouble and sold their own personal holdings of auction-rate securities, which could constitute insider trading, according to the people.
