The State of Michigan Retirement Systems, represented by Berman DeValerio, have been selected as lead plaintiff in a securities class action against Bear Stearns & Co., the once-dominant investment bank that was the first domino to fall in Wall Street’s breathtaking collapse.
After rumors began circulating in March 2008 that Bear Stearns was suffering from a severe liquidity shortfall, the investment bank’s stock plunged. Within days, JP Morgan Chase, at the urging of the Federal Reserve and the US Treasury Department, acquired Bear Stearns for a mere $10 a share; its stock had traded as high as $160.
In appointing the Michigan Systems as lead plaintiff, Judge Robert W. Sweet of the U.S. District Court for the Southern District of New York determined that the Systems’ stock loss of $62 million exceeded the losses sustained by other investors seeking lead plaintiff status in the case and that it was an adequate and typical representative for the proposed plaintiff class. Judge Sweet at the same time approved Berman DeValerio and Labaton Sucharow LLP as co-lead counsel representing the Michigan Systems.
The Systems allege that Bear Stearns, its former chief executive James E. Cayne and other top executives failed to warn investors of mounting losses in two Bear Stearns hedge funds that threatened to fell the company. Several months after the problems became apparent to Bear Stearns management, a liquidity crisis triggered JP Morgan’s acquisition of the firm. The Bear Stearns hedge funds had made highly leveraged investments in exotic securities backed by subprime mortgages.
“At a time that irresponsible behavior was rampant on Wall Street, Bear Stearns was a central player in the subprime mortgage scandal,” said Berman DeValerio partner Jeffrey C. Block. “Investors were never warned of the problems that top executives knew were brewing in its highly leveraged hedge funds.”
Some 20 complaints alleging securities fraud were filed against Bear Stearns and consolidated by the judge. Michigan Attorney General Mike Cox and Michigan Treasurer Robert J. Kleine said in a statement that the state would seek to “maximize recovery for victims” through its involvement with the case.
“We are fighting to ensure families are not cheated out of their pensions. I will do everything I can to ensure that Bear Stearns is held responsible for misleading investors,” Attorney General Cox said. The Michigan Systems represent 574,000 participants and beneficiaries.
Judge Sweet rejected the defendants’ efforts to consolidate the Michigan Systems’ cases with another suit filed under the Employee Retirement Income Security Act (ERISA) on behalf of Bear Stearns’ employee stock ownership plan, which invested in Bear Stearns stock. The judge said that “consolidation is not appropriate.”
“The securities and ERISA actions involve different parties, claims, burdens, pleading standards, losses and insurance issues,” he said.
The Michigan State Retirement Systems filed a detailed, amended complaint on February 27, 2009.
*In August 2017, our firm name changed to Berman Tabacco. Case references and content published before that date may refer to the firm under our prior name, Berman DeValerio.