In what may be a widening probe into CDO deals, The Wall Street Journal reported this morning that the Justice Department is looking into investment bank Morgan Stanley ($) for designing CDOs the bank also bet against.

Many of the details of both the investigation and the deals themselves are unclear. But one interesting fact is that the CDOs were actually marketed and sold not by Morgan Stanley but by Citigroup and UBS. This leads to questions about whether Citigroup and UBS made the necessary disclosures about Morgan Stanley's involvement and interests, which were adverse to those of investors.

That's the same question that investment bank Goldman Sachs faces in a civil lawsuit brought by the Securities and Exchange Commission last month.

The SEC alleges that Goldman Sachs allowed a hedge fund called Paulson & Co. to help pick what went inside a CDO and bet against the same CDO, called Abacus, without disclosing Paulson's involvement to investors. The Journal also reported last month that the Justice Department is conducting its own criminal investigation of Goldman, though no criminal charges have been brought. (Goldman denies that it misled investors.)

According to the Journal piece, Morgan Stanley was involved in two sets of CDO deals, created in 2006, one called Jackson and another called Buchanan. The CDOs were part of what traders called the "Dead Presidents" deals.

Citigroup and UBS each underwrote one of those deals. We've called both banks, but neither would comment on the record to us about the transactions.

An earlier Wall Street Journal piece indicated that in its marketing materials to investors, Citigroup did make some vague disclosures ($) about the Jackson CDO. From the Journal:

A marketing document for a synthetic CDO arranged by Citigroup Inc. called Jackson 2006 stated that the selection of mortgage securities for the deal "may have taken into account certain factors and interests that could be inconsistent with or adverse to the interests" of investors in the CDO.

We have gotten prospectuses for many of the Jackson deals. Here is Jackson I, Jackson IaJackson IIJackson III, Jackson IV and Jackson V.    

Citi did not name Morgan Stanley in its disclosure. Goldman didn't name Paulson in its disclosures either, which Goldman has maintained was a "normal business practice."

The SEC's lawsuit indicates that the agency doesn't think Goldman's disclosures were sufficient. As for the disclosures made by Citi and UBS, it remains to be seen whether they will pass muster.

The SEC has been investigating Wall Street's mortgage-related CDO dealings since 2009, according to the Journal. Many of the investment banks' regulatory filings have said they're cooperating with the inquiries.

Morgan Stanley said in a statement that the company had "not been contacted by the Justice Department about the transactions being raised by The Wall Street Journal and we have no knowledge of a Justice Department investigation into these transactions."