Oct. 17 (Bloomberg) -- Lehman Brothers Holdings Inc., which last month filed the largest bankruptcy in history, is the subject of three federal criminal probes and at least 12 subpoenas, according to a lawyer for the failed bank.

Lead Lehman bankruptcy lawyer Harvey Miller said yesterday in Manhattan federal court that the investigations were launched by New York U.S. attorneys in Brooklyn and Manhattan as well as in Newark, New Jersey. They are focusing in part on Lehman's role in the $330 billion auction rate securities market and possible crimes associated with its $6 billion June stock issue, according to a person familiar with the case.

``It's clear they have given it some urgency and priority,'' said Robert Plotkin, a former Justice Department attorney, now a white collar criminal defense lawyer at Richmond, Virginia-based McGuireWooods. ``Given the notoriety and the headlines, this would be one of the ones that would be on a faster track.''

The demise of Lehman, which sought court protection Sept. 15, accelerated a global credit crisis that has wiped out $30 trillion of equity value in the past year. The U.S. has begun investigations of mortgage lending, securitization and failed banks including New York-based Lehman. The FBI is looking into 26 firms, including American International Group Inc., a senior law- enforcement official said.

`An Outcry'

``There's been an outcry from people in the streets, and that puts pressure on prosecutors to do something,'' said Todd Harrison, a former New York federal prosecutor now with Washington-based Patton Boggs. ``They're going to be looking at all aspects of the credit crisis, including the rating agencies and the mortgage lenders who packaged and sold securities.''

The New York Post reported today that Lehman Chief Executive Officer Richard Fuld is among the 12 subpoenaed, without saying where it got the information. CNBC reported former Lehman Chief Financial Officer Erin Callan, 42, now Credit Suisse's global hedge fund chief, was subpoenaed, without saying where it got the information. She didn't immediately return calls seeking comment.

``It could be an early notice to him not to destroy any documents, obstruct the investigation or talk to witnesses out of school,'' said Plotkin of the reported subpoena of Fuld, 62. ``They also might want to get him in there and nail down his story before he has a chance to talk to advisers.''

June Stock Sale

Investigators have subpoenaed Ernst & Young LLP, Lehman's auditor; U.K.-based bank Barclays Plc, which bought Lehman's North American brokerage; and the New Jersey Division of Investments, which runs a pension fund that lost $115.6 million on a $180 million investment in the June stock sale, according to people familiar with the case.

It's not clear whether these subpoenas are part of the 12 noted by Miller, 75, of New York-based Weil, Gotshal & Manges. In court yesterday, he said a state attorney general is also probing Lehman, without elaborating.

Yusill Scribner, a spokeswoman for U.S. Attorney Michael Garcia in Manhattan, Robert Nardoza, a spokesman for Brooklyn U.S. Attorney Benton Campbell, and Fuld's lawyer, Patricia Hynes of London-based Allen & Overy, declined to comment.

Garcia, 47, Campbell, 42, and Newark, New Jersey U.S. Attorney Christopher Christie have increased their resources to prepare for possible prosecutions associated with the credit crisis and bank failures.

Christie, 46, has subpoenaed documents to determine whether Lehman failed to fully disclose its eroding financial condition at the time of the $6 billion stock offering, according to people familiar with the matter.

Opened Inquiries

Campbell has opened inquiries into whether Lehman executives misled investors about the firm's financial health and whether Zurich-based UBS AG lied to investors about securities backed by subprime mortgages, according to a person familiar with the case.

Also subpoenaed by federal prosecutors were Putnam Investments LLC, the Boston-based mutual fund firm that oversees about $163 billion and bought Lehman bonds and shares; New York- based fund manager BlackRock Inc., a Lehman creditor; AIG, once the world's largest insurer; and New York-based C.V. Starr & Co., run by ex-AIG CEO Maurice Greenberg, according to the people.

The grand jury probes follow not only the implosion of Lehman, but the collapse of New York-based Bear Stearns Cos. earlier this year, the U.S. government takeover of Fannie Mae and Freddie Mac and the rescue of New York-based AIG.

Auction Rate Securities

On the issue of auction rate securities, the grand juries may be exploring whether Lehman misled investors about the viability of the securities. The market collapsed in February after demand for the debt dried up. Banks paid to manage bidding on the debt abandoned the market and stopped acting as buyers of last resort. That caused rates to rise to as high as 20 percent.

Last month, Brooklyn prosecutors charged two former Credit Suisse Group Inc. traders with fraudulently selling corporate clients more than $1 billion of auction-rate securities linked to subprime mortgages, which they claimed were backed by U.S. guaranteed student loans.

A challenge for U.S. attorneys considering prosecutions based on the collapse of the subprime or auction rate markets will be to distinguish normal business activities from fraud.

Prosecutors may rely on e-mails obtained through subpoenas, interviews of employees and forensic accounting to build a case. The U.S. House of Representatives Committee on Oversight and Government Reform recently released several e-mails it obtained from the bank as part of a hearing Oct. 6 in Washington.

Bear Stearns

Campbell, who obtained indictments of former Bear Stearns hedge fund managers Ralph Cioffi and Matthew Tannin in June, cited e-mails showing their disparagement of the securities they were touting to clients. The defendants, who pleaded not guilty, face fraud charges for cheating investors out of $1.6 billion.

``E-mails are a great tool,'' said Christie. ``People seem freer to say things in e-mails that they might not say otherwise.''

Prosecutors may seek to bring a securities fraud prosecution if they can show that Lehman officials sought to mislead investors as to the financial health of the firm.

``They'll be looking for any misrepresentation by the heads of the divisions or anyone working for them,'' said Patton Boggs lawyer Todd Harrison. ``For an indictment, the misrepresentation has to be material and you need to show that investors relied on it to invest more money or keep money in.''

The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Linda Sandler in New York at lsandler@bloomberg.net and; Christopher Scinta in New York bankruptcy court at cscinta@bloomberg.net.

Last Updated: October 17, 2008 15:31 EDT