Officials see more financial crisis cases after JPMorgan suit By Aruna Viswanatha WASHINGTON (Reuters) - Firms responsible for the 2008 financial crisis will face more government lawsuits, federal and state officials said on Tuesday, a day after New York state sued JPMorgan Chase & Co (JPM.N) for fraud over mortgage-backed securities packaged and sold by Bear Stearns. The civil lawsuit accused Bear Stearns, which was bought by JPMorgan through a government-assisted sale in early 2008, of deceiving investors by leading them to believe the quality of loans in the mortgage-backed securities had been carefully evaluated, even though they had not been. Bear systematically ignored defects in the loans and kept investors in the dark, according to the suit by New York Attorney General Eric Schneiderman. New York's suit is the first action to come from a federal-state working group created this year. The state wants JPMorgan to return profits obtained through the alleged fraud and pay damages. Schneiderman and federal authorities announced the case during a press conference in Washington. They said more actions were coming, although they declined to provide specifics. "We are looking forward to more cases," Schneiderman said at the U.S. Justice Department's headquarters. The officials defended the decision to go after JPMorgan, even though the federal government encouraged and was heavily involved in the investment bank's purchase of Bear Stearns. "The liability traveled with the company, so it would be far worse for us to send the message that this kind of fraud is to be tolerated," Schneiderman said. No one is above the law. The suit is the latest headache for JPMorgan, which also faces separate investigations and investor pressure from a $5.8 billion trading loss that sprung from a botched hedging strategy carried out in its London office. JPMorgan said in a statement late Monday that it would contest the allegations, and noted that the suit does not target JPMorgan's activity in the lead-up to the crisis. The suit "relates to Bear Stearns, which we acquired over the course of a weekend at the behest of the U.S. Government. The announcement comes weeks before the presidential election, but the Justice Department said there was no political connection on the timing of the case. "When cases are mature and ready to be brought, we bring them," said acting Associate Attorney General Tony West. President Barack Obama, who is trying to show he is helping the nation move past the devastating housing crisis and resulting recession, announced the task force in his January State of the Union speech. At the time, he said the group would "help turn the page on an era of recklessness that hurt so many Americans." The working group includes the Justice Department, the U.S. Department of Housing and Urban Development, the Securities and Exchange Commission, the New York Attorney General's office and other agencies. In forming the group, officials said it was designed to avoid duplicating efforts and collaborate on specific cases to bring actions more quickly. In the Tuesday press conference, officials said the JPMorgan case was a result of that collaboration. Investigators from the inspector general's office of the Federal Housing Finance Agency reviewed "countless documents and interviewed many witnesses," and the Justice Department handled around 40 interviews and reviewed more than 50 deposition transcripts, John Walsh, the U.S. Attorney for the District of Colorado, said at the press conference. "Yesterday's filing in fact is direct proof that this approach...is smart and it achieves results," Walsh said. When JPMorgan purchased Bear Stearns, the investment bank's instability was threatening the larger financial system. The Federal Reserve and Treasury were desperate to find a buyer who could take on its toxic assets and help calm markets. Experts said the lawsuit could make firms cautious about engaging in the rescue of a troubled financial company in the future. Ernest Patrikis, a partner at the law firm White & Case, said buyers in future deals of this type need to make greater efforts to evaluate the legal dangers and isolate any questionable business units. "If I'm concerned about unknown risk at what I was buying, I wouldn't be merging it into an existing entity," said Patrikis, who also is a former general counsel of the Federal Reserve Bank of New York. I would keep it separate and hopefully build enough walls to make the separateness legally effective. It is unclear how strong a legal defense JPMorgan will have, said John Coffee, director of Columbia University Law School's Center on Corporate Governance, who noted that JPMorgan acquired Bear Stearns through "an arranged marriage." "Morally it's not JPMorgan's responsibility but there were losses and the public wants the historical record set right," Coffee said. They took the bitter with the sweet when they accepted a major package of federal financing to complete the deal. The civil lawsuit against JPMorgan was brought under a powerful New York state law known as the Martin Act, which generally does not require proof of intent, a major stumbling block in most fraud cases. The statute allows the New York attorney general's office to pursue both criminal and civil cases, although the 2006 and 2007 conduct in the JPMorgan complaint appears to fall outside the two-year statute of limitations for misdemeanors and five-year for felonies. The civil statute of limitations is six years. Reporting By Aruna Viswanatha and David Ingram in Washington and Jed Horowitz and Karen Freifeld in New York; Editing by Tim Dobbyn and Karey Wutkowski