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Bear Stearns Asset Management Must Defend Bank of America Lawsuit

By Bettina Padurano for CEOWORLD Magazine Updated:October 1, 2009

Bear Stearns Asset Management Inc., now part of JPMorgan Chase & Co. (JPM), and two former Bear Stearns fund managers must defend some claims by Bank of America Corp. (BAC) in a lawsuit over the collapse of two Bear Stearns funds in 2007, a federal judge has ruled.

A U.S. district judge in Manhattan on Wednesday let the largest U.S. bank pursue fraud and contract claims against JPMorgan Chase & Co (JPM.N), which now owns Bear, and the other defendants over transactions involving billions of dollars, court records show. Two other claims were dismissed, the records show.

Cioffi and Tannin are scheduled to go on trial October 13 in a Brooklyn, New York, federal court for alleged fraud over their handling of the hedge funds, whose 2007 collapse helped lead to Bear’s demise the following year.

According to a notation in the court docket Wednesday, U.S. District Judge Paul A. Crotty in Manhattan has denied a motion to dismiss breach of contract and fraud claims.

The judge granted a motion to dismiss a breach of fiduciary duty claim. He didn’t rule on the merits of the case.

The lawsuit, filed last October, alleges the asset-management unit and ex-fund managers Ralph Cioffi and Matthew Tannin misled Bank of America about the funds’ financial health in connection with financing transactions with the bank, including a $4 billion securitization of mortgage-backed assets in May 2007, known as CDO-squared, DOW JONES reported.

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