New Federal Probe of Lehman's Collapse

Looks like things just got alot uglier at Lehman Brothers. The last 2 month have not been peaches and cream at the financial bank. Now there's word that federal prosecutors have at least 3 subpoenas which could result in arrests in the near future. But as of now, there will be individuals who will have to testify before grand juries.

Citing people close to the probe who requested anonymity, federal prosecutors in Brooklyn, Manhattan and New Jersey were examining events leading to Lehman's collapse and bankruptcy filing.

One person said New Jersey prosecutors were looking into whether Lehman executives including Fuld misled investors involved in the $6 billion infusion of capital announced by Lehman in June about the bank's condition. That infusion came as Lehman disclosed a $2.8 billion third-quarter loss, which caused its shares to plunge.

The New Jersey Division of Investment, which put money into the capital raising, had been subpoenaed, and that the division's director did not return a call seeking comment.

Brooklyn and Manhattan prosecutors meanwhile are looking into remarks made by Lehman executives during a September 10 conference call, which was five days before the company's bankruptcy filing, and are also investigating whether Lehman assigned proper values on its large commercial real estate holdings.

Legal experts expected prosecutors would likely try to build fraud cases against Lehman executives by finding internal documents that contradicted public statements about the bank's status.

Representatives of the prosecutors' offices declined to comment, as did a spokesman for Fuld, although Fuld has said his statements about Lehman's condition were based on the best information he had at the time.

Joseph Gregory, the former president, and Erin Callan, former chief financial officer are others who supposedly were subpoenaed.

There's certainly more to come from this in the coming weeks.