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For JPMorgan, California prosecutor is wild card

Tuesday, 22 Oct 2013 | 4:49 PM ET
JPM's California problem
Tuesday, 22 Oct 2013 | 3:44 PM ET
After agreeing with the federal government to settle mortgage security issues for $13 billion, JPMorgan may have more mortgage headaches ahead. CNBC's Kate Kelly reports the details.

As JPMorgan Chase braces for an expected $13 billion settlement with the government over its mortgage-securities sales, it's keeping an eye on one key player: Benjamin Wagner, the U.S. attorney in Sacramento.

Wagner, a career Justice Department lawyer who has been overseeing California's Eastern District since 2009, has amassed nationwide evidence of fraudulent activity in the packaging of home loans by JPMorgan during the pre-crisis era, say people familiar with the matter.

Even though at least two-thirds of the mortgages now under scrutiny in various cases against JPMorgan were inherited from Bear Stearns and Washington Mutual— the companies JPMorgan acquired under duress in 2008—the securities Wagner has investigated were handled by legacy JPMorgan employees, these people add.

U.S. Attorney Benjamin Wagner
Rich Pedroncelli | AP
U.S. Attorney Benjamin Wagner

They are also the basis, say these people, for a potential criminal case against the bank or individuals who worked there.

(Read more: How the JPMorgan deal could curtail credit)

In late September, the Wall Street Journal has reported, Wagner flew to Washington with two large charts he expected to reveal at a news conference highlighting JPMorgan's errant ways in the packaging and sales of mortgage securities in the mid-2000s.

But the next morning, JPMorgan CEO Jamie Dimon unexpectedly approached Holder about a new and higher settlement amount—a move that paved the way for Friday's tentative agreement to a payment to resolve the civil mortgage charges of some $13 billion.

That settlement is now being buttoned down and may be announced later this week, according to one of the people familiar with the matter.

(Read more: Too big to care: Dimon will be fine)

As U.S. attorney of a region that spans from the Oregon border to Los Angeles County, Wagner has brought a gamut of cases against methamphetamine sellers, sex offenders, and even a bank robber nicknamed "the Fedora Bandit." But he's also brought a series of mortgage fraud cases, experience that has no doubt come in to play here.

In a CNBC interview outside JPMorgan's headquarters Monday, Dimon indicated that he was eager to put the mortgage-securities probes behind him.

(Read more: What was JPMorgan's Jamie Dimon thinking?)

"We are going to try and resolve everything we can," he said.

A spokeswoman for Wagner said she couldn't comment on the status of the investigation.

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