JPMorgan Chase (NYSE:JPM), Bear Stearns, Morgan Stanley (NYSE:MS) and Credit Suisse (NYSE:CS), Settle for $100 Million with American Business Financial Services Trustee

An attorney announced yesterday that JPMorgan Chase (NYSE:JPM), Bear Stearns, Morgan Stanley  (NYSE:MS) and Credit Suisse (NYSE:CS) agreed to an overall $100 million settlement over the lawsuit filed by trustee George Miller of American Financial Services Inc.

According to the lawsuit, these banks empowered and enabled American Business Financial Services to continue operations by allowing the value of their assets to overstated. Eventually the mortgage company became insolvent and went bankrupt.

Bear Stearns (now part of JPMorgan) and JPMorgan aggregately agreed to pay $55 million, Credit Suisse will pay $37.5 million, and Morgan Stanley will pay out $7.5 million.

The focus of mortgage loans offered by American Business was to  people with poor credit scores. Part of their mortgage business was financed by notes sold directly to the public, which became worthless when American Business failed. A large number of the over 20,000 people who lost their money were the elderly, who lost everything when the company failed.

In their filing for bankruptcy in 2005, the debt of American Business was listed as high as $1.1 billion. In this lawsuit, Miller asked for $750 million from former executives at the banks, and their auditors; along of course from the banks themselves.

This isn’t the first settlement in this ongoing situation, as a $33 million settlement was agreed to by former officers and directors of American Business in October, and a $20 million settlement was worked out with Blank Rome LLP, and law firm based in Philadelphia whom the lender was represented by.

Still in arbitration is a case involving the auditor of American Business, BDO Seidman LLP, which has been sued by Miller to the tune of $500 million for their alleged role in the collapse of the mortgage lender.