Bloomberg News

JPMorgan Sued for Fraud by CIFG Assurance Over CDOs

November 27, 2012

JPMorgan Chase & Co. (JPM:US) was sued by CIFG Assurance North America Inc., which says it lost more than $100 million on collateralized debt obligations created by Bear Stearns, the investment bank JPMorgan acquired in 2008.

Bear Stearns stocked the CDOs with toxic mortgage securities and profited by betting against the portfolios, the insurer said in a complaint filed yesterday in New York State Supreme Court. Bear Stearns told CIFG that independent firms had selected the collateral, New York-based CIFG said.

“As a result of its fraud, Bear Stearns was able to pass off huge losses onto CIFG,” according to the complaint.

CIFG said it was induced to provide financial-guaranty insurance on credit default swaps guaranteeing payment on notes issued by ACA ABS CDO 2006-2 Ltd. and Libertas Preferred Funding II Ltd., according to the complaint. CIFG last week sued Bank of America Corp. for fraud over guaranty policies tied to mortgage securities.

Jennifer Zuccarelli, a spokeswoman for New York-based JPMorgan, didn’t immediately respond to an e-mail seeking comment on CIFG’s complaint.

The case is CIFG Assurance North America Inc. v. J.P. Morgan Securities LLC, 654074-2012, New York State Supreme Court (Manhattan).

To contact the reporter on this story: David McLaughlin in New York at dmclaughlin9@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net


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