JP Morgan Reaches Settlement With Pension Funds in Suit Over Toxic Securities


JP Morgan and several pension funds have reached a settlement in a class action lawsuit filed against the bank.

The lawsuit stems from investment losses sustained from mortgage-backed securities sold to investors, which, the lawsuit claims, were “far riskier than represented”.

Under the settlement, JP Morgan will pay $500 million to investors, including the Public Employees’ Retirement System of Mississippi.

From Chief Investment Officer:

JP Morgan and a group of pension funds have reached a preliminary, $500 million agreement to settle a mortgage-backed securities lawsuit, according to court filings and the Wall Street Journal.

The pension funds, including the New Jersey Carpenters Health fund and Public Employees’ Retirement System of Mississippi, represent a class of investors who purchased securities they allege were “far riskier than represented, not of the ‘best quality’ and not equivalent to other investments with the same credit ratings.”

Bear Stearns issued the nearly $18 billion worth of mortgage-backed securities in question. JP Morgan, now the world’s largest banking corporation, bought the foundering firm for $10 per share in March 2008, as the financial crisis sharply escalated.

On Thursday, lawyers for the pension funds filed a letter with the presiding New York judge indicating a preliminary settlement had been reached.

“Following extensive negotiations,” the letter stated, “the parties have reached agreement and executed a binding term sheet containing the material terms of the settlement.”

All parties have a deadline of Feb. 2 to give the court a detailed outline of the settlement.


Photo by Sarath Kuchi via Flickr CC License

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