New York Attorney General Sues Bear Stearns and JPMorgan Chase

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On October 1, New York Attorney General Eric T. Schneiderman filed suit against Bear Stearns & Company, now a unit of JPMorgan Chase, in New York state court in Manhattan. This is the first suit filed by a member of the joint federal and state Residential Mortgage Backed Securities Fraud Working Group, which was formed in January and is co-chaired by Schneiderman. The complaint asserts two claims under New York law: securities fraud under Article 23-A of the General Business Law (the Martin Act) and persistent fraud or illegality under Section 63(12) of the Executive Law. The complaint alleges that Bear Stearns ignored defects in mortgage loans underlying its RMBS, made material misrepresentations to investors about the quality of due diligence, ignored defects identified by due diligence firms, and failed to perform post-purchase quality review. Losses, according to the complaint, total approximately $22.5 billion across more than 100 subprime and Alt-A securitizations which the defendants sponsored and underwrote in 2006 and 2007. Complaint.