NEW YORK - JPMorgan Chase & Co, Credit Suisse Group and Morgan Stanley have agreed to pay $100 million to settle a lawsuit over their role in the collapse of a Philadelphia mortgage lender, an attorney said on Friday.
The attorney, who represents the trustee charged with liquidating the lender, American Business Financial Services Inc, said the banks agreed to the settlement on Oct. 7.
The trustee had charged that the banks improperly helped prop up the lender when its business of lending to subprime borrowers was actually dead. Some 22,000 debt investors were left in the lurch when the lender collapsed into bankruptcy in 2005.
Under the terms of the settlement, which is subject to court approval, JPMorgan will pay $55 million to settle claims against itself and Bear Stearns, Credit Suisse will pay $37.5 million, and Morgan Stanley will pay $7.5 million, the attorney, Steven Coren of Philadelphia law firm Kaufman Coren & Ress, said.
The companies denied any wrongdoing.
Coren said it was the first case he was aware of in which major banks have settled over their role in the collapse of a subprime lender.
Representatives for JPMorgan, Credit Suisse and Morgan Stanley declined to comment.
ABFS filed for bankruptcy in January 2005, listing debts of more than $1 billion. The trustee has sought to recover as much as $750 million from the lenders' banks, auditors and former directors and officers, on behalf of the firm's creditors.
The trustee previously reached a $33 million settlement with the former directors and officers of ABFS, and a $20 million settlement with Blank Rome LLP, the Philadelphia law firm that represented ABFS, Coren said.
The trustee is still involved in arbitration with auditor BDO Seidman.
The case is In re: American Business Financial Services Inc, U.S. Bankruptcy Court, District of Delaware, No. 05-10203. (Reporting by Emily Chasan; editing by John Wallace)