Michigan's Fraud Lawsuit Against Bear Stearns Moves Forward

Contact: John Sellek or Joy Yearout 517-373-8060

January 26,  2011

            LANSING -  Attorney General Bill Schuette and State Treasurer Andy Dillon today announced that Michigan's national class action securities fraud lawsuit against Bear Stearns will move forward.  Michigan serves as lead plaintiff in the case.  The company allegedly violated federal securities law by misleading investors, including Michigan taxpayers, about the value of sub-prime related securities.  The State of Michigan Retirement Systems (SMRS) lost $62 million and other investors billions of dollars.

In an opinion issued late Friday, the Hon. Robert W. Sweet, U.S. District Judge for the Southern District of New York, ruled against Bear Stearns' motion to dismiss the lawsuit, allowing the case to move on to the discovery phase and ultimately toward trial. 

"Investment firms will be held accountable for reckless actions that caused Michigan taxpayers to lose millions of their hard-earned dollars," said Schuette.  "Violations of the public trust will not be tolerated."

The State of Michigan is the court-appointed lead plaintiff in the lawsuit, which alleges the defendants misled the state's pension funds and other investors about Bear Stearns' risky exposure to the U.S. housing market and subsequent write-downs to its assets, which led to a collapse of the company and its stock.  As a result, pension funds and other investors across Michigan and the nation lost billions of dollars, including the $62 million loss by the State of Michigan Retirement Systems.  

            "This is good news for state pensioners and other investors, who have a right to expect transparent and open securities markets," said State Treasurer Dillon. "With the fiscal challenges we are facing today, it is important to recoup every penny possible.  We will continue working hard to recover a significant portion of the Bear Stearns losses, and this ruling takes us an important step closer to our goal."

SMRS, which invests on behalf of Michigan Public School Employees, State Employees, State Police and Michigan Judges, holds combined assets of approximately $47.5 billion, making it one of the largest pension systems in the nation. 

Two nationally-recognized law firms with expertise in securities law, Berman DeValerio and Labaton Sucharow LLP, are representing the State and other investors in the case, which is captioned In re Bear Stearns Companies, Inc. Securities, Derivative, and ERISA Litigation, 08-mdl-1963 (S.D.N.Y).

The Attorney General and State Treasurer remain strong advocates for Michigan citizens whose pensions or investments have been put at risk due to fraudulent activity.  Michigan also serves as lead plaintiff in a national class action case against AIG for nearly $109 million in losses to SMRS.

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