US sets up federal probe into Lehman bust

GONE BUST: Lehman disclosed a USD 2.8 billion third-quarter loss.

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New York: Stepping up investigations into the collapse of investment bank Lehman Brothers, Federal Prosecutors have issued at least a dozen subpoenas including one to the chief executive, Richard S Fuld Jr, the New York Times reported today.

Citing people close to the probe, the daily said Federal Prosecutors in Brooklyn, Manhattan and New Jersey are examining events leading to Lehman's collapse and its subsequent bankruptcy filing.

One area of focus for New Jersey prosecutors is whether or not Fuld or other Lehman executives had made any misleading statements about the bank's condition to investors who took part in a USD 6-billion infusion of capital announced by Lehman on June 9, the newspaper said quoting a person close to the matter.

The new capital came as Lehman disclosed a USD 2.8 billion third-quarter loss that sent its shares plunging.

The New Jersey Division of Investment, which put money into the capital raising, has received a subpoena, the person said. William Clark, Director of the division, did not return a call seeking comment, New York Times said.

Prosecutors in Brooklyn and Manhattan are looking, among other things, at comments Lehman executives made during a September 10 conference call, five days before the company filed for bankruptcy, the report said.

They are also investigating whether Lehman put proper values on its large commercial real estate holdings, people close to the matter told the paper.