LANSING, Mich. (Legal Newsline) - Michigan Attorney General Bill Schuette announced on Wednesday that a national class action securities fraud lawsuit against Bear Stearns will go forward with the state of Michigan serving as lead plaintiff.
Bear Stearns allegedly misled investors about the value of subprime-related securities, which violated federal securities law and resulted in billions of dollars in losses.
Because of the company's alleged trickery, the state of Michigan Retirement Systems says it lost $62 million.
Last week, U.S. District Judge Robert W. Sweet ruled against dismissing the case.
"Investment firms will be held accountable for reckless actions that caused Michigan taxpayers to lose millions of their hard-earned dollars," Schuette said. "Violations of the public trust will not be tolerated."
The suit alleges that Bear Stearns misled the state's pension funds and other investors about risky exposure to the U.S. housing market. This included the subsequent write-downs to its assets, which led to the company's collapse and devalue of its stock, Schuette says.
"This is good news for state pensioners and other investors, who have a right to expect transparent and open securities markets," Michigan Treasurer Andy Dillon said. "With the fiscal challenges we are facing today, it is important to recoup every penny possible. We will continue working hard to recover a significant portion of the Bear Stearns losses, and this ruling takes us an important step closer to our goal."
With assets of nearly $47.5 billion, SMRS is one of the largest pension systems in the nation. It invests on behalf of Michigan Public School Employees, State Employees, State Police and Michigan Judges.
National firms Berman DeValerio and Labaton Sucharow LLP are representing the state and other investors in the case.
Michigan also serves as the lead plaintiff in a similar national class action case against AIG for nearly $109 million in losses to SMRS.