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FDIC Conducting 50 Criminal Probes Into Failed Banks, WSJ Says

The Federal Deposit Insurance Corp. is pursuing about 50 criminal investigations against executives, directors and employees of banks that failed since the financial crisis began, the Wall Street Journal reported, citing an interview with Fred Gibson, the FDIC’s deputy inspector general.

The criminal investigations typically relate to loan officers at the vice president or senior vice president level, Gibson told the newspaper. Some involve higher-ranking officials, including former directors of failed institutions, he added, without identifying banks or people under investigation.

The agency, which has shuttered 294 lenders since the start of 2008, has authorized lawsuits to recoup more than $2 billion from more than 80 officers and directors, the report said. Richard Osterman, the FDIC’s acting general counsel, said in an interview last month that the agency had approved 50 lawsuits seeking $1 billion in losses stemming from the credit crisis.

The FDIC, which reviews losses for every bank failure, in July filed a suit seeking $300 million in damages from four executives of IndyMac Bancorp Inc. In that case, executives are accused of granting loans that were unlikely to be repaid while seeking to benefit from the bank’s compensation structure. The former employees have denied any wrongdoing.

As federal receiver for failed banks, the FDIC uses its deposit insurance fund to backstop the cost of the collapses, selling the bank assets to recoup any lost money. The agency has three years from the date of the failure to file lawsuits seeking compensation for a civil wrong.

According to Osterman, lawsuits were authorized during closed sessions of the FDIC board and haven’t been made public. The agency has held off court action while conducting settlement talks with executives whose actions may have led to bank collapses, he said last month.

The FDIC is likely to work with the Federal Bureau of Investigation on the criminal probes, the Wall Street Journal said.

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