A new complaint was filed on Monday, October 1, 2012 arising out of residential mortgage-backed securities ("RMBS"), an investment vehicle at the bottom (with other vehicles) of the current Great Recession. The complaint is by the State of New York against JPMorgan Securities, JPMorgan Chase, and EMC Mortgage.
Basically the complaint is based on two sets of alleged manifestations of fraud, deception, and misrepresentation: First, in promoting and selling RMBS, and second, "systemic fraud" in failing and refusing to correct "defects" after due diligence and quality control procedures revealed that RMBS presented serious problems to the finances of investors and Homeowners. Here is a copy of the complaint: Download Complaint.New York v. JP Morgan Securities LLC etc. et al (Filed in N.Y. Supreme Court on Monday, Octo ber 1, 2012).
This is reportedly the first time that the claim of systemic fraud has been collectively alleged against the promoters and servicers of residential mortgage-backed securities as a class, as it were. Gretchen Morgenson, "JPMorgan Unit is Sued Over Mortgage Securities Pools" (New York Times Online, posted October 1, 2012). The reason is a New York law, General Business Law 352, et seq., known as the Martin Act, which allows for broad claims of fraud against groups of financial actors allegedly committing fraud. See Michael J. de la Merced, "In JPMorgan Case, the Martin Act Rides Again" (Dealbook Blog on New York Times Online, posted October 2, 2012). More about New York's Martin Act later.
Another commentator who reads the complaint like it is a newspaper, finds that the complaint does not contain any news and is not newsworthy. Peter J. Henning, "In JPMorgan Suit, a Lack of New News" (Dealblook Blog on New York Times Online, posted October 2, 2012).
Perhaps the new complaint presents issues of Good Faith and Fair Dealing that are worth a little more attention. Those issues will be explored here.
More to come.
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