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Net Net: Promoting innovation and managing change

Report: FBI Investigating Fannie and Freddie Execs

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The lawsuit filed by the Securities and Exchange Commission against six executives of Fannie Mae and Freddie Mac may not be the worst of the executives’ worries.

According to a report in the Daily citing high-ranking sources with the U.S. Department of Justice, the Federal Bureau of Investigation and other federal authorities have launched their own investigations into whether the executives misled investors about the exposure of their companies to risky mortgages.

The involvement of the FBI raises the specter of criminal liability.

The SEC only brings civil cases against alleged wrongdoers. It’s very bad news when the FBI gets involved in your case.

One of the executives, Daniel Mudd, has taken a leave of absence from his position as chief executive of Fortress Investment Group. There was widespread speculation inside Fortress last week that Mudd would step down.

(Hat tip: Julia La Roche)

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