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.


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Pension Funds Lead “Enormous” New Class Action Lawsuit Against JP Morgan

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It’s been less than a year since JP Morgan agreed to a $13 billion settlement to compensate homeowners and pension funds for losses stemming from failed investments.

Now, the bank has been told it will face another class action lawsuit centering on the same issue: the toxic mortgage-backed securities it sold investors in the years leading up to the financial crisis.

At the forefront of the lawsuit are two pension funds: the Laborers Pension Trust Fund for Northern California and Construction Laborers Pension Trust for Southern California, who are both lead plaintiffs.

More from Business Insider:

A federal judge on Tuesday said JPMorgan Chase & Co. must face a class action lawsuit by investors who claimed the largest U.S. bank misled them about the safety of $10 billion of mortgage-backed securities it sold before the financial crisis.

U.S. District Judge Paul Oetken in Manhattan certified a class action as to JPMorgan’s liability but not as to damages, saying it was unclear how investors could value the certificates they bought, given how the market was “not particularly liquid.” He said the plaintiffs could try again to certify a class on damages.

Oetken ruled 10 months after JPMorgan reached a $13 billion settlement to resolve U.S. and state probes into the New York-based bank’s sale of mortgage securities.

The class consists of investors before March 23, 2009 in certificates issued from nine of 11 trusts created by JPMorgan for the April 2007 offering. The other two trusts attracted only a handful of investors, and are the subject of other lawsuits.

Oetken named the Laborers Pension Trust Fund for Northern California and Construction Laborers Pension Trust for Southern California as lead plaintiffs, and their law firm Robbins Geller Rudman & Dowd as lead counsel.

Another bank, Morgan Stanley, said this summer it expects to be sued by CalPERS. The pension fund lost almost $200 million during the financial crisis on real estate investments it bought from the bank.


Photo by Sarath Kuchi via Flickr CC License