As co-lead counsel representing the sole lead plaintiff State of Michigan Retirement Systems, Berman Tabacco negotiated a $294.9 million settlement, including $19.9 million from the auditor, Deloitte & Touche. The action alleged that Bear Stearns embarked on a business plan that left it extraordinarily vulnerable to volatility in the housing market by purchasing and originating an enormous number of unusually risky mortgages to securitize and sell, and by maintaining billions of dollars of these assets on its books. As alleged, the company then used these assets as collateral to purchase even larger quantities of debt and to finance the ballooning costs of its daily operations. Unknown to the investing public, the action asserted that the company had secretly abandoned any meaningful effort to manage the huge risks it faced, even before the class period began. In 2005 and again in 2006, the U.S. Securities and Exchange Commission privately warned the company of crucial deficiencies in the models it used to value mortgage-backed securities and to assess risk. Instead of revising its models to accurately reflect a rapidly accelerating downturn in the housing market, the company bolstered the value of its stock by persisting in using its misleading mortgage valuation and value-at-risk models in an effort to conceal the extent of its exposure to loss. The case resolved after Berman Tabacco conducted four years of vigorously contested litigation, which included successfully defeating the defendants’ motions to dismiss and interviewing 95 former Bear Stearns employees and other persons with relevant knowledge. At the time, the eventual settlement for $294.9 million represented one of the 40 largest securities class action settlements under the Private Securities Litigation Reform Act (PSLRA). This is particularly significant in light of the fact that no government entity had pursued actions or claims against Bear Stearns or its former officers and directors related to the same conduct complained of in the firm’s action.