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Bear Stearns May Be Held Accountable For Lying About Failings, Not Actual Failings, Per Se

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This is probably of little import to James Cayne, who if he isn’t, should be focusing on how he can regain his title of “championship bridge player” after being upended by the No. 15 seed (he was No. 2) as his last tournament, but Bear Stearns was hit with a legal claim today that doesn’t put the bank in the best light. The arbitration was brought by���wait for it—someone who invested in the hedge funds that must not be named and lost money. The claim was filed with NASD by a 73-year old retired insurance salesman from Wisconsin, who gave Bear Stearns $500,000 and will probably get back something around zero. The investor states that BS misled him about its exposure to subprime mortgages. We try and stay away from 383 Madison because our tetanus shots aren’t in order but if we had stopped over there and pressed a water glass up to the door of Cayne’s office when he was given the news (presuming, of course, that he wasn’t out golfing), we imagine we would have heard something along the lines of “What’s taken them so long to figure us out? I practically used the phrase 'we’ve been lying to you for some time now' in the letter I sent investors a few weeks back.”
Bill Fitzpatrick, an analyst at Johnson Asset Management in Racine, Wisconsin went out on a limb and guessed that “there’s probably more [lawsuits] where that came from,” in his professional opinion. Claims for excess of $100 million in losses are expected to be filed. The likely flood of legal issues is expected to put added pressure on shares that are already at a 52-week low, and are no longer a candidate for WallStrip, which features stocks at a 52-week high. And that may be what stings the most.
Bear Stearns hedge fund investor files claim [Reuters]