A federal judge approved the $150 million settlement in a class action lawsuit brought against J.P. Morgan by the pension fund of American Federation of Television and Radio Artists (AFTRA), according to court documents filed today.
According to the documents, J.P. Morgan purchased in June 2007 $500 million worth of medium-term notes secured by the assets of the structured investment vehicle Sigma Finance. Then, in February 2008, the bank allegedly began providing repurchase financing to Sigma, which was failing, even though it knew that its actions would materially impair the value of the MTNs (medium-term notes) it held for the class when Sigma failed.
J.P. Morgan made almost $1.7 billion of profit on the subsequent sales and improvements in the market after forcing Sigma into receivership, the suit alleges.
A spokesperson for the AFTRA pension did not immediately respond to a request for comment.
The lawsuit, originally filed in 2009, was joined by two other pensions funds, the Imperial County Employees Retirement System in California and the Investment Committee of the Manhattan and Bronx Surface Transit Operating System in New York, and represents a class of investors that allegedly occurred losses as a result of J.P. Morgans securities lending program.
According to the initial court complaint, J.P. Morgan buried its head in the sand and ignored signs that Sigma would collapse.
The bank agreed in March that it would pay $150 million in the settlement. U.S. District Judge Shira Scheindlin in Manhattan approved the settlement today.
A spokesperson for J.P. Morgan declined to comment.
The case is Board of Trustees of the AFTRA Retirement Fund v. JPMorgan Chase Bank NA, 09-cv-686, U.S. District Court, Southern District of New York (Manhattan).