JPMorgan Chase CEO Jamie Dimon’s purchase of Bear Stearns is coming back to haunt him four years later.
JPMorgan yesterday was sued by the New York Attorney General for an alleged wide-ranging mortgage fraud run by Bear Stearns in 2006 and 2007.
The defunct investment bank deceived investors in mortgage securities — about loan defects, its subpar loan reviews and other shortcomings — leading to losses of roughly $22.5 billion.
Dimon led the acquisition of Bear Stearns in 2008.
The lawsuit, filed in Manhattan state court, is the first case that has been filed against a big bank as part of a new mortgage working group formed by President Obama last year.
The working group, led by AG Eric Schneiderman, who was one of the most vocal critics of a broad multi-state mortgage settlement that didn’t hold banks accountable for wrongdoing, has been tasked with investigating mortgage fraud related to the housing boom.
“[Schneiderman] hopes [that this suit will] lay the groundwork to discuss meaningful relief for homeowners,” said one person familiar with the AG’s thinking.
The AG, who did not return calls for comment, has not yet set damages but it could be in the hundreds of million of dollars.
A JPMorgan spokesman said that the bank intends on contesting the allegations but also expressed “disappointment” with Schneiderman for not communicating with the firm prior to filing its case.
“We’re disappointed that the [Attorney General] decided to pursue its civil action without ever offering us an opportunity to rebut the claims and without developing a full record,” the spokesman said.
More banks are expected to be sued by the AG.