NEW YORK (Reuters) - U.S. federal prosecutors are stepping up criminal investigations into possible wrongdoing in the failed auction-rate securities market, the Wall Street Journal reported on Thursday.
One investigation is examining whether Lehman Brothers Holdings Inc
Auction-rate securities were billed as safe, cash-like instruments bought and sold in periodic auctions, but big banks stopped supporting the auctions in January as investor demand for the debt dried up.
Many investors have been stuck holding the debt, sparking investigations into whether banks sold the securities even as they privately worried market turmoil was making it harder to complete auctions.
The newspaper said federal prosecutors in Brooklyn, New York, were investigating whether individuals at Lehman defrauded customers by dumping auction-rate securities into their accounts before the market broke down.
A Lehman spokesman was not immediately available for comment to Reuters. A spokesman for the U.S. Attorney's Office in Brooklyn declined to comment.
The newspaper said the U.S. Department of Justice in Washington, D.C., also was weighing whether to bring insider trading charges against ex-UBS executive David Shulman for selling his own holdings of auction-rate securities ahead of that market's collapse, according to two people familiar with the matter.
Shulman ran the auction-rate securities business for UBS. He left the firm in August, the newspaper said. A lawyer for Shulman, Robert Anello, declined to comment.
A UBS representative was not immediately available for comment on Thursday. A Justice Department spokeswoman declined to comment.
(Reporting by Martha Graybow, editing by Maureen Bavdek)
