Bear Stearns, now a unit of JPMorgan Chase & Co., and a group of its directors and officers agreed on June 6 to pay $275 million in cash to settle a shareholder class action alleging that the defendants misled investors about its financial results during the run-up to the financial crisis. The settlement doesn’t appear to require individual defendants to make any payment out of their own pockets; presumably their contribution will be covered by directors and officers insurance. It must be approved by Southern District Judge Robert Sweet.
The agreement comes just two weeks after Southern District Judge Lewis Kaplan approved a $90 million settlement in a similar suit against Lehman Brothers and a group of its executives and directors (NYLJ, May 29). Kaplan had expressed concerns about the fact that the entire $90 million is covered by D&O insurance, meaning top Lehman officials won’t pay a penny. Plaintiffs lawyers at Bernstein Litowitz Berger & Grossmann had anticipated Kaplan’s concerns and took the unusual step of putting together a report explaining that defendants’ combined liquid worth is substantially less than $100 million. Based on that report and financial information handed over by Lehman officials, Kaplan called the settlement “fair, reasonable, and adequate.”
