Prosecutors start criminal probe of Bear funds-WSJ

NEW YORK, Oct 4 (Reuters) - U.S. federal prosecutors have launched a criminal investigation into two mortgage-related hedge funds at Bear Stearns Cos BSC.N that collapsed during the summer, The Wall Street Journal reported on its Web site on Thursday, citing people familiar with the matter.

The U.S. attorney in Brooklyn, New York made a request to Bear Stearns for information related to the hedge funds, the article said.

The probe is in the early stages, and has not generated subpoenas, the report said.

Bear Stearns was not immediately available for comment.

The U.S. investment bank, battered by the collapsed hedge funds and losses in its flagship mortgage business which led to the departure of its co-president Warren Spector, said it would consider selling a stake in itself if a deal with a partner would create value. The bank's chief executive James Cayne earlier denied the bank needed a cash infusion.

Bear Stearns, whose shares have lost more than a fifth off their value since the start of the year, is also being sued by a limited partner in one of the failed hedge funds.

Navigator Capital Partners LP argues the bank took only meagre steps to prevent the fund's collapse.

Bear said in mid-July that two of its structured finance funds, the Bear Stearns High-Grade Structured Credit Strategies Fund and the High-Grade Structured Credit Strategies Enhanced Leverage Fund, had very little value.