The Residential Mortgage-Backed Securities Working Group filed a civil suit against Bear Stearns & Company, now a part of JPMorgan Chase, Monday.
According to the New York Times, the case was brought forth to the Supreme Court by Attorney General Eric T. Schneiderman, who is also co-chairman of the federal mortgage task force.
The suit claimed that Bear Stearns and EMC Mortgage, cheating investors who bought mortgage securities from the company from 2005 through 2007, the Times reported.
The two firms misrepresented the quality of the loans in the securities and provided false information about the loans they sold to investors.
"Defendants systematically failed to fully evaluate the loans, largely ignored the defects that their limited review did uncover, and kept investors in the dark about both the inadequacy of their review procedures and the defects in the underlying loans," Schneiderman's office said to Businessweek.
The suit also claimed that Bear Stearns collected cash back payments from its lenders and kept the money. The bank also ignored the problems caused by the loans.
JPMorgan Spokesman Joseph Evangelisti, told the Times "we're disappointed that the New York A.G. decided to pursue its civil action without ever offering us an opportunity to rebut the claims and without developing a full record - instead relying on recycled claims already made by private plaintiffs."
He also included that the claims by the task force predate the banks acquisition.
According to the Times, the claims in the civil suit are nothing new to the bank. Last week, JPMorgan lost a suit when Federal Judge Jed Rakoff, turned down the banks request to dismiss a complaint by Belgian-French bank, Dexia.
Dexia had purchased mortgage securities for $1.6 billion, during the economic crisis.
Businessweek reported that Schneiderman said " We've had quite a lively interchange, shall we say," during a press conference at the Justice Department, Tuesday.
He also added that he is "confident" the work of this task force "will result in more cases going forward."
The federal mortgage task force was created by the Justice Department in January.
