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The Equels Law Firm Scores $27 Million Victory Against Bear Stearns & Co., Inc.

November 10, 2008

The Equels Law Firm Scores $27 Million Victory Against Bear Stearns & Co., Inc. The Equels Law Firm Scores $27 Million Victory Against Bear Stearns & Co., Inc. Judgment Allows Recovery of Funds from a Bad Investment Strategy that Eventually Shut Down the National Heritage Life Insurance Company ORLANDO, Fla., Nov. 11

ORLANDO, Fla., Nov. 11 /PRNewswire/ -- In a case similar to the situation now faced by hundreds of insurance companies, pension plans, school boards, local governments and other institutions across the country victimized by purchases of portfolios comprised of collateralized mortgage-backed obligation (CMO) and collateralized debt obligation (CDO) securities from Wall Street Investment Banks in the current far reaching scandal, Bear Stearns & Co. paid $27,353,000 to settle an adverse trial court judgment for providing a bad CMO-based investment strategy to the now defunct National Heritage Life Insurance Company (NHL). According to a recent decision handed down by Ninth Judicial Circuit Court General Magistrate James E. Glatt, Jr., following a non-jury civil trial in Orange County, Fla. (Case #48-1996-CA-00069-O), Bear Stearns misrepresented the very nature of the investment strategy to NHL.

Delaware Insurance Commissioner Matthew Denn serves as the receiver for NHL as the company is currently in liquidation. Thomas K. Equels, Managing Director of the Equels Law Firm, represented the Receiver in court and successfully argued its case against Bear Stearns.

"The judge's ruling allowed the state of Delaware to recover $26,852,806 in damages to NHL," said Equels. "In addition to the ruling, Bear Stearns faced a prejudgment interest award and the court reserved jurisdiction to consider adding tax costs and prejudgment interest."

The Delaware Insurance Commissioner had entered an Order of Confidential Supervision over NHL, a Delaware-based company operating in Orlando, due to reasonable belief that the company was in a hazardous financial condition. To ensure compliance with the state's regulatory requirements and to comply with the order, NHL hired Bear Stearns & Co., whose parent company, The Bear Stearns Companies, Inc., was one of the largest global investment banks and securities trading and brokerage firms in the world. Bear Stearns was one of the founders of the CMO and CDO investment concepts that have plagued the national and international financial markets.

As part of Bear Stearns' investment strategy, it provided certain investments for purchase to assist in NHL's goal of obtaining a "spread" above its annuity obligations to its policyholders according to the lawsuit. Those investments included substantial investments in "synthetic CMO portfolios."

NHL relied solely on Bear Stearns for financial advice based on its computer modeling system managed by the Financial Analytical Structure Transactions ("FAST") group, which it claimed could accurately project realized gains related to specific investments. Bear Stearns touted this modeling capability as being a one-of-a-kind application, unmatched in the investment industry.

Judge Glatt's Final Order found that despite written and verbal representations by Bear Stearns that these CMO portfolios were hedged, balanced, safe and secure, the investments recommended and selected by Bear Stearns were high-risk, extremely volatile, and completely inappropriate for NHL. The Court further found that Bear Stearns knew this from the outset of the relationship and through its action and inactions prevented NHL from determining the extremely risky nature of its investments until it had suffered significant financial losses, which contributed to the deepening of NHL's insolvency and, ultimately, its demise.

The Judge found both fraud and misrepresentation by Bear Stearns, said Equels.

Tom Equels is the Managing Director of the Equels Law Firm and leads the firm's Litigation Practice Group. His practice is devoted to complex litigation, with particular emphasis on civil racketeering, business torts and commercial matters. For more than 25 years Equels has represented international, national and state governments, banks, insurance companies, aviation companies, construction and development companies, and others in an active trial practice.

The Equels Law Firm has established itself as one of Florida's most effective and experienced law firms in the areas of complex litigation, government, business torts and personal injury law. The Equels Law Firm attorneys in Miami, Orlando and Tallahassee are known for providing high-quality, timely, efficient and personalized service to its local, national and international clients, whether representing them in either federal and state court or before federal, state or local governments. You can learn more about the Equels Law Firm at http://www.equelslaw.com or by calling Thomas Equels at (305) 859-7700.

SOURCE The Equels Law Firm

CONTACT: Thomas K. Equels of The Equels Law Firm, +1-305-859-7700 or +1- 407-758-5004, [email protected]; Charles Jones, +1-305-372-1234, [email protected], for The Equels Law Firm

Copyright © 2008 PR Newswire ORLANDO, Fla. , Nov. 11 /PRNewswire/ -- In a case similar to the situation now faced by hundreds of insurance companies, pension plans, school boards, local governments and other institutions across the country victimized by purchases of portfolios comprised of collateralized mortgage-backed obligation and ...


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