January 4, 2008 / 6:26 PM / 12 years ago

Prosecutors Eye Bear Stearns Over Hedge Funds-CNBC

NEW YORK (Reuters) - Bear Stearns Cos BSC.N officials are expected to meet in the middle of January with U.S. prosecutors to discuss the failure of two of its hedge funds, CNBC television said on Friday.

The funds, the High-Grade Structured Credit Strategies Fund and the High-Grade Structured Credit Strategies Enhanced Leverage Fund, sought protection from creditors over the summer after investing heavily in collateralized debt obligations backed by subprime mortgages.

Bad bets on subprime mortgages and related write-downs led to an $854 million fourth-quarter loss at Bear Stearns, the first loss in the history of Wall Street’s fifth-largest investment bank.

Bear Stearns said it would cooperate fully with prosecutors. Its shares traded down $4.08, or 4.9 percent, at $79.75 in afternoon trading on the New York Stock Exchange. The shares have lost about half their value in the last year.

Reporting by Jonathan Stempel; Editing by Leslie Gevirtz

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