AP source: Criminal probe of Goldman under way

Thursday April 29, 2010, 10:24 pm

WASHINGTON (AP) -- The U.S. attorney's office in Manhattan is conducting a criminal investigation of Goldman Sachs over mortgage securities deals the big Wall Street firm arranged, a knowledgeable person said Thursday.

The person said the probe stems from a criminal referral by the Securities and Exchange Commission. The source spoke on condition of anonymity because the inquiry is in a preliminary phase. The SEC earlier this month filed civil fraud charges against Goldman and a trader in connection with the transactions, alleging it misled investors by failing to tell them the subprime mortgage securities had been chosen with help from a Goldman hedge fund client that was betting the investments would fail. Goldman has denied the charges and said it will contest them in court.

News of the action came a day after a group of 62 House lawmakers, including Judiciary Committee Chairman John Conyers, D-Mich., asked Justice to conduct a criminal probe of Goldman.

SEC spokesman John Nester wouldn't confirm or deny that the agency had made a referral to the Justice Department for a criminal investigation. He declined any comment on the matter, as did Yusill Scribner, a spokeswoman for the U.S. attorney's office in Manhattan......