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Bear Stearns to be sued over subprime funds: CNBC

The Bear Stearns name is seen outside their headquarters in New York July 18, 2007. Investors in Bear Stearns that were virtually wiped out from large bets on risky mortgages are planning to sue the company as early as Monday, television channel CNBC reported on Friday. REUTERS/Shannon Stapleton

NEW YORK (Reuters) - Investors in Bear Stearns Cos. BSC.N hedge funds that were virtually wiped out from large bets on risky mortgages are planning to sue the company as early as Monday, television channel CNBC reported on Friday.

The lawsuit will be brought by the firm of Bernstein Litowitz Berger and Grossman LLP, which represented investors against WorldCom Inc. over a massive accounting fraud, CNBC said.

According to CNBC, the lawsuit will allege Bear Stearns made material misrepresentations in offering documents, misrepresented risks of the hedge funds in those documents, and misrepresented its ability to control those risks.

An official at Bernstein Litowitz told Reuters the firm was contacted by some investors who were seeking their advice.

Officials at Bear Stearns did not immediately return requests for comment.

Legal experts have said the losses in the Bear funds are so large that litigation is almost inevitable.

But they say plaintiffs could have a tough time proving their case. Because the funds were aimed at sophisticated investors such as institutions and wealthy clients, it could be hard to argue that the risks were not properly understood.

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