A federal judge sharply criticized statements and actions by former executives of Bear Stearns Cos in the final days of the investment bank, saying important information was “withheld from the public” and allowing a shareholder lawsuit to move forward.
Bloomberg News reports that in a 59-page ruling released Monday, U.S. District Judge Robert Sweet rejected Bear Stearns’s effort to dismiss the case, which also names ex-chief executive James Cayne, ex-co president Warren Spector and accounting firm Deloitte & Touche LLP as defendants.
The failure of Bear Stearns was an early warning sign of the financial crisis to come. The firm began to struggle in 2007 amid the collapse of two internal hedge funds that invested in structured debt securities. It devolved into a run on the firm and a refusal by counterparties to extend credit, ending with the firm’s forced sale to JPMorgan in March 2008.
The case before Sweet is one of the last remaining pieces of Bear shareholder litigation, most of which was settled through a class action in 2012. JPMorgan would be on the hook for any judgments or settlements against Bear Stearns.
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