Bear Stearns hit with claim over losses

Bear Stearns and several of its asset management employees are the subject of an arbitration claim by an investor who suffered losses in one of the company’s structured credit hedge funds.
AUG 01, 2007
Bear Stearns and several of its asset management employees are the subject of an arbitration claim by an investor who suffered losses in one of the company’s structured credit hedge funds. The claim was filed today with the NASD on behalf of an unidentified 73-year-old investor in Wisconsin who claims to have lost $500,000 in the Bear Stearns High Grade Structured Credit Fund, which has lost almost all of its value, the company recently told clients. In the claim, the investor alleges that Bear Stearns “deceived” him into investing in the fund, “which was far riskier and more speculative than represented,” and that he was also “misled into holding onto his investment.” Specifically, the claim alleges that the fund had “enormous exposure to low-quality, subprime debt,” even though investors were told that at least 90% of its investments were in AAA- and AA-rated securities. The suit names as defendants Bear Stearns, Bear Stearns Asset Management, portfolio managers Ralph Cioffi and Ray McGarrigal, former BSAM CEO Richard Marin and Matthew Tannin, COO on the fund. Attorneys from law firms Zamansky & Associates and Rich & Intelisano, both of which represent the investor, said they anticipate filing more claims against Bear Stearns on behalf of other institutional and individual investors who have lost money in the fund, as well as its sister hedge fund, the Bear Stearns High Grade Structured Credit Enhanced Leveraged Fund. “We have had dozens of conversations with institutional investors in both the U.S. and the U.K.,” said Jacob Zamansky, securities arbitration attorney. He said the firm, along with Rich & Intelisano, has been contacted by investors who have lost more than $100 million combined in both funds. Two representatives for Bear Stearns did not immediately return calls seeking comment on the lawsuit.

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