Bloomberg News reports that Schneiderman's lawsuit focuses on activities conducted by the Bear Stearns business that JPMorgan Chase took over in 2008. The lawsuit claims that Bear Stearns falsely claimed that the loans backing its securities were of a high quality and that the company ‘routinely overlooked defective loans’ that were brought to their attention.
‘The defendants systematically failed to fully evaluate the loans, largely ignored the defects that their limited review did uncover, and kept investors in the dark about both the inadequacy of their review procedures and the defects in the underlying loans,’ says Schneiderman's complaint.
The lawsuit names J.P. Morgan Securities, JPMorgan Chase Bank and JPMorgan's EMC Mortgage unit as defendants in the case. Joe Evangelisti, a JPMorgan spokesman, says the financial institution plans to challenge the lawsuit.
‘We're disappointed that the NYAG decided to pursue its civil action without ever offering us an opportunity to rebut the claims, and without developing a full record – instead relying on recycled claims already made by private plaintiffs,’ Evangelisti said in an e-mail statement to Bloomberg News.