Lehman CEO under scrutiny for investor statements

NEW YORK (Reuters) - Richard Fuld's attempt to reassure investors in Lehman Brothers Holdings Inc just days before it filed the largest-ever U.S. bankruptcy is attracting scrutiny from lawmakers and others examining the company's collapse.

A U.S. House of Representatives panel grilled Fuld, Lehman's chairman and chief executive, on Monday over whether comments he made during a conference call with Wall Street analysts in the investment bank's waning days were deceptive. Fuld testified there was no attempt to mislead anyone.

Legal experts said that under securities laws, criminal cases can be brought if prosecutors have evidence that corporate executives knowingly misled investors in an attempt to defraud them into buying or selling securities. The Securities and Exchange Commission can also bring civil charges.

The FBI is investigating Lehman, Fannie Mae, Freddie Mac, American International Group Inc and other companies hard hit by the mortgage and credit crisis, law enforcement officials have told Reuters.

No charges have been brought against any executive at these firms in connection with the probes.

The U.S. Attorney's Office for the Eastern District of New York is investigating whether Lehman executives misled investors by making upbeat public comments in the September 10 conference call five days before the firm filed for bankruptcy protection, the Wall Street Journal reported Monday, citing people familiar with the investigation.

Robert Nardoza, a spokesman for the U.S, Attorney in Brooklyn, New York, declined to comment on the report. A Lehman spokesman, Nathaniel Garnick, also had no comment.

Legal experts said cases of this kind can be hard to prove, with e-mails documenting fraud or the testimony of cooperating witnesses often key for a successful prosecution.

They said prosecutors probing Lehman would surely examine whether public statements by executives squared with comments they expressed privately.

"Typically in a prosecution those statements are identified and pinpointed, to show what the intent was," said John McCaffrey, a white-collar criminal defense attorney in Cleveland, and a former FBI agent. "You would take those statements and then overlay them against what those particular individuals knew."

Legal experts said prosecutors look for a pattern of misleading statements -- not just an isolated case. If several people are involved, they could also be investigated for alleged conspiracy to commit fraud, according to experts.

"I think what is going to be looked at very closely by the government is what statements were made to the public, by whom, and whether those statements differed materially from what those people thought was actually the case," said Paul Radvany, a law professor at Fordham University in New York and a former federal prosecutor.

At Monday's hearing, members of the U.S. House Committee on Oversight and Government Reform asked Fuld about the September 10 call during which the bank said it had adequate capital to operate.

Fuld replied that on that date, "given the business we had, we had sufficient and strong capital and liquidity."

"There certainly was no attempt to mislead anyone," he said.

Aitan Goelman, a former prosecutor now at Zuckerman Spaeder LLP, a Washington, D.C. law firm, said executives at struggling financial companies can walk a fine line when communicating to investors.

He said presenting an accurate picture of a company's health can be tricky when discussing complex financial instruments, such as mortgage-backed securities that are difficult to value. Executives need to be honest, but not create a panic among investors, he said.

If an executive announces the company is "teetering on the edge of bankruptcy, you end up putting yourself in bankruptcy," he said. "You want to be accurate but not overly pessimistic."

(Additional reporting by Grant McCool; editing by Jeffrey Benkoe)