Business

Published: Sunday October 11, 2009 MYT 10:11:00 AM

JPMorgan, others to pay $100M settlement


PHILADELPHIA (AP) - JPMorgan Chase & Co. and two other investment banks have agreed to pay $100 million to settle a lawsuit over their contribution to investor losses in the collapse of American Business Financial Services Inc., the bankruptcy trustee's lawyer said Friday.

The banks, including then-independent Bear Stearns, Credit Suisse Group and Morgan Stanley, deny any wrongdoing in settlement documents to be filed in a Philadelphia court, said lawyer Steven Coren of the firm Kaufman, Coren & Ress.

JPMorgan, which took over Bear Stearns in March 2008, agreed to pay $55 million, Credit Suisse agreed to pay $37.5 million and Morgan Stanley agreed to pay $7.5 million, Coren said. The proceeds are to be distributed among the company's creditors.

The banks had allegedly taken part in "reporting fictitious gains and fictitious assets to create the illusion the company was profitable and solvent when it was losing hundreds of millions of dollars," Coren said.

American Business Financial Services, which packaged subprime mortgage loans into securities for investors, filed for bankruptcy in January 2005. With interest, its debts exceed $1 billion, Coren said.

The settlement is the largest so far in a series of lawsuits by court-appointed bankruptcy trustee George Miller. Late last year, officers and directors settled for about $33 million, and in June the former counsel, Blank Rome LLP, settled for $20 million.

The trustee is also suing the company's former auditor, BDO Seidman.

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