Bear Stearns Class Certification Overturned in Sterling CaseErik Larson
Bear Stearns, the investment bank acquired by JPMorgan Chase & Co. in 2008, won an appeal overturning a ruling that certified a class of plaintiffs in a lawsuit over its work for a brokerage accused of fraud.
The U.S. Court of Appeals in New York ruled today the class of plaintiffs didn’t show wrongdoing by Bear Stearns. The case relates to Bear Stearns’s work as a clearing broker for Sterling Foster & Co., a brokerage accused of manipulating stock prices.
“The Levitt plaintiffs have not adduced any evidence at the class certification stage that indicates that Bear Stearns directed or instigated sham or fraudulent trades, or that it otherwise departed from the performance of normal clearing functions,” the panel of judges said in the ruling.
Brokers at Sterling Foster duped investors out of more than $70 million in what prosecutors described as one of the most successful boiler rooms in history. Randolph Pace, who secretly controlled the firm, was sentenced to more than eight years in prison. More than a dozen Sterling Foster brokers were also sent to jail.
“It’s a very sad decision that they would in effect ignore the overwhelming facts in this case that were shown,” the plaintiffs’ lawyer, Leslie Trager, said in a phone interview.
The case is Levitt v. J.P. Morgan Securities, 10-4596, U.S. Court of Appeals for the Second Circuit (Manhattan).