WASHINGTON–The Department of Justice is reportedly pursuing criminal charges against executives at Royal Bank of Scotland and JPMorgan Chase related to selling flawed mortgage securities.
If true, it would be one of the few cases where individual executives are held responsible for corporate conduct related to the financial crisis.
The Wall Street Journal said the executives allowed the sale of the securities despite reportedly receiving warnings that they were securitizing too many potentially toxic mortgages.
“Officials are working to establish that the bankers ignored warnings from associates that they were packaging too many shaky mortgages into investment offerings and are weighing whether they can prove that constituted fraud,” the Wall Street Journal reported.
The Journal said prosecutors are examining a $2.2-billion deal that repackaged home mortgages into bonds in 2007. In a settlement in 2007, the SEC said the lead banker on the deal was described as trying to push it through over concerns of the diligence department.
The Journal reported that at J.P. Morgan, prosecutors are focusing on two people who worked on a different residential-mortgage deal, and added that the DOJ is pushing to complete any criminal cases against individuals before the end of President Obama’s presidency and the expiration of the 10-year statute of limitations in 2017.
Earlier this year, the Department of Justice said it would begin to target individual employees for corporate misconduct in addition to the companies themselves.