Bear Stearns Faces Multiple Lawsuits

New York, NYBear Stearns faces multiple lawsuits following the company's recent collapse and sale to JPMorgan Chase & Co. Allegations made in one of the lawsuits could bolster investor complaints that Bear Stearns officials knew there were problems with the company's finances while still telling investors that the company was fine.

Bear Stearns was recently sold to JPMorgan Chase & Co for only $10 a share. Shares had previously been worth up to around $170, making the $10 a share sale a monumental loss for investors.

One of the lawsuits was filed by the liquidator of two Bear Stearns hedge funds that fell apart in July 2007. The liquidator alleges that Bear Stearns marketed the funds as being safe even though the company knew that the funds were vulnerable to changes in the housing market. Those hedge funds were invested in securities based on US sub-prime mortgages. The suit, which claims defendants breached their fiduciary duties, seeks punitive damages and compensation to cover one billion dollars in losses. Other allegations included in the lawsuit are fraud, negligence and breach of contract.

Meanwhile, employees of Bear Stearns who invested in the Bear Stearns Employee Stock Ownership Plan (ESOP) are investigating a lawsuit against the company and its officials, alleging they were told that Bear Stearns stock was safe. They further allege that the company did not properly manage the Stock Ownership Plan and lost hundreds of millions of dollars in employee retirement savings.

Among employee complaints against Bear Stearns are: breach of fiduciary duty, failure to give ESOP participants accurate information about their investments, including failure to divulge the true risk of the investments, and failure to monitor fiduciaries.

Employees rely on their plan fiduciaries to be honest with them about their investments. They count on those fiduciaries to make prudent investments and take care of their plan's assets. It is one thing to lose a little money on an investment. It is another to watch the value of your investment plummet from $170 to $10, while having officials tell you that the liquidity of your stock is fine.

The matter is made worse because employees thought their retirement savings, thousands of dollars worth of savings, were safe in the Bear Stearns ESOP. Now they are left with next to nothing for their retirement.

Current and former employees of Bear Stearns who invested in the company's ESOP may be eligible to join a suit against Bear Stearns. If you invested in Bear Stearns ESOP only to see your investment value drop, contact a lawyer who can help determine your eligibility to join a lawsuit.