The mortgage task force of the Justice Department, including New York's attorney general, has launched its first lawsuit—against JPMorgan, charging wide-scale misconduct by Bear Stearns in the selling of mortgage securities. The complaint accuses Bear Stearns, bought by JPMorgan Chase in 2008, of defrauding investors who purchased mortgage securities packaged by the company from 2005 to 2007, reports the Wall Street Journal. The company ignored serious problems with the loans in the securities, the suit states, and made "material misrepresentations" about them, reports Reuters. Investors lost more than $22.5 billion on at least 100 of those securities—a quarter of their original value, according to the lawsuit.
The suit accuses Bear Stearns of institution-wide misconduct that affected numerous deals during the period, reports the New York Times. A JPMorgan spokesman says the company will contest the allegations. “We’re disappointed that the New York AG 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,” said the spokesman, who noted the alleged misconduct predates JPMorgan's purchase of Bear Stearns. (Read more New York stories.)