WORLD PROPERTY CHANNEL ®

(PHILADELPHIA, PA) -- After three years of courtroom wrangles, JPMorgan Chase (NYSE:JPM), Bear Stearns, Morgan Stanley (NYSE:MS) and Credit Suisse (NYSE:CS) have agreed to settle a $750 million subprime mortgage scam by bankrupt Philadelphia-based American Business Financial Services Inc. for $100 million.

A total 26,000 individual investors filed claims for $600 million allegedly lost by them in the swindle.

Steven Coren

Attorney Steven Coren of Philadelphia law firm Kaufman Coren & Ress confirms the settlement calls for JPMorgan, including Bear Stearns which Morgan bought in 2008, paying $55 million; $37.5 million from Credit Suisse; and $7.5 million from Morgan Stanley.

Coren's firm represents Bankruptcy Court-approved trustee George L. Miller of of the Philadelphia  forensic accounting firm Miller, Coffey, Tate LLP.

Coren says it is the first case he was aware of in which major banks have settled over their role in the collapse of a subprime lender.

The lawyer says Miller previously reached a $33 million settlement with the former directors and officers of ABF.

The suit alleges the investment banks collectively securitized $3.6 billion in subprime loans for American Business Financial in the 2003 to 2005 period.

The suit alleges they had helped ABF book more than $500 million in fictitious gains and more than $500 million in fictitious assets when they knew the mortgage lender was insolvent.

The banks have denied all allegations of wrong doing.

The settlement, which requires approval by the U.S. Bankruptcy Court in Wilmington, DE, would provide no immediate relief for investors because of additional litigation, according  Miller.

"I'm trying to get the money to the people," Miller told the Philadelphia Inquirer.  None of the investors, most retired individuals,  has been paid a penny to date.

Miller previously secured settlements of $16.7 million from directors and officers of American Business Financial and $20 million from the Philadelphia law firm Blank Rome L.L.P., which represented ABF.

Founded in 1988 by the late Anthony Santilli, American Business Financial collapsed in 2005, owing $600 million to investors who bought unsecured notes, some of them promising annual returns of 15 percent. The lender listed total debt of $1 billion.

ABF thrived by enticing investors to buy its high-interest-paying notes and then making loans at above-market interest rates to home buyers with impaired credit, according to the suit.

In the end, the company used money from new investors to pay off the notes of previous investors in a classic Ponzi scheme, according to court documents.

Two big legal battles remain before investors receive any money from the company's estate, Miller says.

One involves Greenwich Capital Financial Products Inc., which provided $500 million of debtor-in-possession financing to American Business Financial after the bankruptcy filing.

That lawsuit, involving claims by Miller and counterclaims by Greenwich, has frozen all payments to investors.

The second is an arbitration case against the lender's accounting firm, BDO Seidman L.L.P. Miller is seeking $962 million from that firm.

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