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New York Attorney General Eric Schneiderman filed a civil fraud lawsuit against JPMorgan Chase & Co (JPM.N) on Monday over mortgage-backed securities packaged and sold by Bear Stearns.
It was the first action to come out of a working group created by President Barack Obama earlier this year to go after wrongdoing that led to the financial crisis.
JPMorgan, which bought Bear Stearns for $10 a share in March 2008, said in a statement it would contest the allegations. The suit accuses Bear Stearns of failing to ensure the quality of loans underlying residential mortgage-backed securities it packaged and sold in 2006 and 2007. Investors lost more than $22.5 billion on more than 100 of those securities, or one-quarter of their original value, the lawsuit said.
The RMBS Working Group is a collaborative effort led by five co-chairs including Assistant Attorney General for the Criminal Division Lanny Breuer, Acting Assistant Attorney General for the Civil Division Stuart Delery, U.S. Attorney for the District of Colorado John Walsh, Director of Enforcement for the U.S. Securities and Exchange Commission (SEC) Robert Khuzami, and New York State Attorney General Eric Schneiderman. The working group and its members are focused on investigating potential false or misleading statements, deception or other misconduct by market participants in the creation, packaging and sale of mortgage-backed securities.
The Attorney General previously spent 15 years in private practice as an attorney, and later as a partner, at the firm of Kirkpatrick and Lockhart, where he handled complex litigation.
The company has been described as "a lobbying firm that represents the hi-tech and energy sectors" and in the past has hired former legislators favorably inclined towards their clients.
It is ranked as the 8th largest law firm in the United States by the National Law Journal and as the 11th largest among law firms worldwide by The American Lawyer
From WSJ 3/17/2008
Pushed to the brink of collapse by the mortgage crisis, Bear Stearns Cos. agreed -- after prodding by the federal government -- to be sold to J.P. Morgan Chase for the fire-sale price of $2 a share in stock, or about $236 million. Bear Stearns had a stock-market value of about $3.5 billion as of Friday -- and was worth $20 billion in January 2007.