Bloomberg- Bear Stearns Co. won a trial over claims by investors seeking $141 million for losses they suffered following the collapse of Manhattan Investment Fund Ltd., a hedge fund client of the bank’s prime brokerage in the 1990s.
Bear Stearns, a unit of JPMorgan Chase & Co., shouldn’t be held liable for failing to discover fraud at the hedge fund, which filed for bankruptcy in 2000, an eight-person jury said today in Manhattan federal court. The fund’s manager, Michael Berger, pleaded guilty the same year to charges that he lied about the fund’s losses from shorting Internet stocks.
A court ruling during Manhattan Investment Fund’s bankruptcy proceedings had imposed on prime brokers a burden of proof to show they acted in good faith when dealing with fraudulent clients, said Howard Schiffman, a lawyer representing the Securities Industry and Financial Markets Association, or SIFMA. Bear’s victory leaves open the question of what acts prime brokers need to take to prove they meet a good faith standard.
