JPMorgan acquired Bear Stearns in 2008. Lawsuits filed against the two firms allege they misled investors about mortgage-backed securities in 2006 and 2007, including making misrepresentations about the sale of the mortgage-backed securities to four credit unions. The first lawsuit filed by the National Credit Union Administration was filed in 2011 and involved $1.4 billion in mortgage backed securities. That lawsuit is pending.
According to this most recent lawsuit, Bear Stearns knew that up to 74 percent of its substandard mortgages would fail within a year, but continued to repackage them and sell them. Bloomberg (12/17/12) reports the four credit unions purchased $3.6 billion in mortgage-backed securities based on misleading documents. The lawsuit, which was filed on February 14 in Kansas City, alleges documents used by Bear Stearns claimed the securities met underwriting guidelines, but those guidelines were "systematically abandoned."
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JPMorgan and the defendants claim the lawsuit was not filed within the statute of limitations and further argued that the plaintiffs did not show they are entitled to relief. The lawsuit is Phoenix Light SF Ltd. v. JPMorgan Securities LLC, 651755-2012.
Meanwhile, Fifth Third Bancorp has agreed to pay $16 million to settle a securities fraud case filed by shareholders. According to the Business Courier (12/19/12), the lawsuit was filed four years ago and was consolidated into a class action lawsuit. Fifth Third said it settled the lawsuit to avoid potential litigation costs and denied any liability.