Subprime Litigation – Round Two, Bear Stearns Style

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First, it was KPMG and New Century. 

Now it’s the Bear Stearns hedge funds.  

Who wants to bet which Big 4 firm is next?

Looks like Jake Zamansky is going to stay very , very busy…

Bear Stearns, Deloitte sued over hedge fund losses

The liquidators of two Bear Stearns Cos mortgage hedge funds that collapsed last year, filed suit on Monday against the company and its auditor, Deloitte & Touche, seeking to recover over $1 billion in losses.

The suit, filed in U.S. District Court in Manhattan, accuses Bear, the managers of the hedge fund, and Deloitte, of not living up to assurances that the funds were relatively safe and conservative investment vehicles.

The liquidators added that the funds were never designed to withstand even a “slight downtick” in the housing market.  Bear Stearns and its hedge fund managers “conceived, marketed and managed hedge funds that they knew would be viable so long as – but only so long as – the U.S. housing market continued to rise,” the suit said.

The suit charges that the company, the fund managers, and Deloitte violated their fiduciary and professional duties. The suit said Deloitte’s preparation of the funds’ audits was “at a minimum negligent.”

The suit is also seeking punitive damages…

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