Report: Prosecutors here looking into JPMorgan securities sales

Federal prosecutors in Philadelphia were silent Thursday after a report emerged that they had launched a criminal investigation into whether JPMorgan Chase sold mortgage-backed securities that the bank knew or suspected would fail.

Citing unnamed sources, the New York Times said the Philadelphia investigation was one of two new inquiries the bank faces on opposite coasts.

In a Securities and Exchange Commission filing this week, JPMorgan disclosed that criminal and civil prosecutors in the Eastern District of California had opened parallel investigations there related to its sale of mortgage-backed securities.

The bank said it had been notified in May that civil prosecutors in California already concluded it had violated securities laws "in connection with its subprime and Alt-A residential MBS offerings during 2005 to 2007."

According to the newspaper, Philadelphia prosecutors are examining whether JPMorgan sold mortgage-backed securities "without ensuring that the investments met underwriting standards." It described that probe as "more preliminary" than the California one but could not say what prompted it.

A spokeswoman for Zane David Memeger, the U.S. attorney for the Eastern District of Pennsylvania, said the office would neither confirm nor deny that an investigation was ongoing. A JPMorgan Chase representative did not return a call for comment.

The bundling and resale of defective mortgages was a key culprit in the financial collapse that plunged the economy into a recession five years ago. The banks have since been fending off a stream of shareholder suits and civil claims over their role or possible misconduct, including one brought last fall by New York's attorney general.

In its filing, JPMorgan Chase said it also responded to requests from federal prosecutors in Connecticut, subpoenas and requests from the SEC Division of Enforcement, and a request from the Office of the Special Inspector General for the Troubled Asset Relief Program, all related to its sale of mortgage-backed securities.

But the bank and its counterparts have thus far avoided any criminal prosecution for misconduct related to the sale of the flawed investments.

Staff writer David Sell contributed to this article.