Plaintiffs Lawyers Say Bear Stearns May Have Double-Dipped on Defaulted Mortgages
Plaintiffs lawyers are hoping for what one calls a potential “home run” in litigation against Bear Stearns and, possibly, other banks that packaged mortgages into securitized bundles.
In a federal lawsuit that has been dismissed and is now being readied for filing in state court, an insurer of some mortgage bonds that were created by Bear Stearns contends that the failed investment bank pocketed payments for loans that had defaulted early on instead of forwarding the payments to investors, reports the New York Times (reg. req.).
“If they knew the loans were defaulting, the money should have been passed on to investors,” says attorney Jerry Silk of Bernstein Litowitz, who apparently is not involved in the Ambac Assurance Corporation suit against Bear Stearns but has filed similar litigation against other banks. “We’ve heard this a lot, and we’re trying to prove it. It would be a home run for us.”
A spokeswoman for JPMorgan Chase, which acquired Bear Stearns several years ago, declined to comment on how Bear Stearns may have handled settlement payments. However, Jennifer Zuccarelli says Ambac’s case lacks merit and promises a vigorous defense. She also says Ambac, a sophisticated investor, knew about risks that it chose to assume in deals.
