JPMorgan Chase & Co. (JPM)’s Bear Stearns unit agreed to a proposed $275 million cash settlement of a consolidated federal lawsuit filed by investors who lost money from 2006 to 2008.
Under the agreement, which requires approval by a judge, the money, minus legal fees, will go to shareholders who claimed the company issued “materially false and misleading statements” about financial results, according to papers filed yesterday in Manhattan federal court. The legal fees requested haven’t yet been specified.
Company officials “continue to deny any wrongdoing” in the case, according to a stipulation filed with the court. Among the defendants are former Bear Stearns executives and directors including James Cayne, Alan Schwartz, Warren Spector, Samuel Molinaro and Alan Greenberg.
Shareholders filed a series of lawsuits against Bear Stearns beginning in 2008, claiming the company’s statements artificially inflated its share price, which soared to $159.36 in April 2007, and then fell to $106.55 on Aug. 3, 2007, after news about “Bear Stearns’ risky hedge funds” and negative rating-agency outlooks. The suit is on behalf of investors who bought Bear Stearns stock and other equity securities and options from Dec. 14, 2006 to March 14, 2008.
Bear Stearns, a New York-based investment bank, announced in January 2008 that U.S. prosecutors were inquiring into the collapse of the hedge funds. The stock fell to $78.87, according to court filings. Other announcements in early 2008 led to further drops in the stock price. In March JPMorgan Chase announced it was buying Bear Stearns for $2 a share.
The defendants entered into the settlement “solely to eliminate the burden, expense, uncertainty and distraction of further litigation,” the filing states.
Brad Karp, a lawyer for Bear Stearns, declined to comment on the settlement. Thomas Dubbs, a lawyer for the investors, didn’t return a message seeking comment.
The lead plaintiff in the case is the State of Michigan Retirement Systems.
In January 2011 U.S. District Judge Robert Sweet denied a Bear Stearns motion to dismiss the case. Negotiations on a settlement with a mediator in 2009 were unsuccessful, according to court papers. An agreement in principle on this settlement was reached in May 2012. The case produced more than 9 million pages of documents, according to the filing.
The case is In re The Bear Stearns Cos. Securities, Derivative and ERISA Litigation, 08-mdl-1963 and 08-cv-2793, U.S. District Court, Southern District of New York (Manhattan).
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