A state civil lawsuit filed in New York yesterday accuses a unit of JPMorgan Chase & Co. of mortgage-related financial fraud, the first action lodged by the newly formed residential mortgage-backed securities working group.
The New York Attorney General's Office, which teamed with the U.S. Justice Department and other federal agencies, alleges in the suit that Bear Stearns & Co. and a unit, EMC Mortgage, made false and misleading statements to investors in the packaging and sale of mortgage-backed residential securities. The suit contends Bear Stearns duped investors into thinking mortgage-backed securities had been thoroughly evaluated.
"We follow the facts and the law wherever they lead, and if we uncover evidence of fraud or other illegal conduct, we pursue that conduct aggressively," Tony West, the acting associate attorney general, said today at a news conference at Main Justice.
The residential mortgage-backed securities group was formed earlier this year as an effort to share resources among federal and state law enforcement agencies. Attorney General Eric Holder Jr. at the time noted that reckless or unethical behavior in the financial services arena might not be criminal.
At the press conference, New York Attorney General Eric Schneiderman attributed the civil action to an "incredible collaborative enterprise" among state and federal counterparts.
"This complaint goes to the heart of the misconduct that created that bubble and crash," Schneiderman said. He said his office had been working on the suit since the spring of 2011. He promised today that "there are more cases to come."