Agreement covers losses from retirement fund
JPMorgan Chase & Co. has agreed to pay $150 million to settle a lawsuit by the American Federation of Television and Radio Artists retirement fund and other investors over losses that the plan sustained from the bank’s Sigma Finance hedge fund.
The settlement with investors was disclosed in filings with the U.S. District Court in Manhattan and on the bank’s website. The AFTRA fund and the bank announced on Feb. 7 that they had reached a tentative settlement.
“Resolution of the case at this juncture allow the parties to avoid the risks and costs associated with trial, as well as potential years of continued litigation on appeal,” the plaintiffs said in a court filing. “Moreover, continued litigation of this action could result in a judgment or verdict less than the recovery under the settlement or no recovery.”
The suit alleged that JPMorgan Chase lost a “substantial portion” in cash collateral in medium-term notes issued by Sigma Finance Inc., a structured investment vehicle sponsored by Sigma Finance Corp. It said creditors seized over $25 billion of Sigma’s $27 billion in assets in September and October 2008, leaving about $1.9 billion as security for about $6.2 billion of outstanding medium-term notes.
Sigma once carried “triple-A” ratings, but the suit alleged that JPMorgan “buried its head in the sand and refused to heed the warning signs” when analysts predicted in 2007 that Sigma would be unable to repay the notes.
A June 4 hearing has been set for the court to consider preliminary approval.
Other plaintiffs in the JPMorgan case are the Manhattan and Bronx Surface Transit Operating Authority Pension Fund in New York City, and the Imperial County Employees’ Retirement System in El Centro, Calif.
A spokeswoman for the AFTRA plan had no comment.
JPMorgan spokeswoman Kristen Chambers said, “We are confident that we acted prudently and appropriately, but we were able to agree on a compromise that avoids continued litigation costs and delay.”