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Bear Stearns Settles SEC Lawsuit

June 28, 1999

WASHINGTON (AP) _ Bear Stearns & Cos., a large investment firm, disclosed today it had agreed to pay $25 million in a settlement with the Securities and Exchange Commission, which was investigating its relationship with a small brokerage firm that defrauded investors.

The settlement heads off a civil lawsuit by the SEC which was believed to be imminent, but New York-based Bear Stearns still faces related criminal investigations by Manhattan District Attorney Robert Morgenthau and federal prosecutors.

SEC spokesmen declined comment on and would not confirm the agreement in principal for a settlement, which Bear Stearns disclosed in a corporate filing with the agency.

The company said the settlement payments would have no significant effect on its business or financial condition.

Bear Stearns said that under the settlement, it will pay a $5 million civil fine and pay an additional $20 million to settle unspecified private claims, presumably those of customers who lost a total of $75 million with the now-defunct brokerage, A.R. Baron & Co. The investors have maintained that Bear Stearns, which processed transactions for A.R. Baron, should have noticed signs of fraudulent activity at the smaller firm.

Bear Stearns has said it is the responsibility of the brokerage firms themselves, not the companies that process their trades, to detect and prevent fraud.

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