Exhibit 1Philip R. Forlenza Erik Haas Karla G. Sanchez PATTERSON BELKNAP Wes & TYLER LLP 1133 Avenue of the Americas ‘New York, New York 10036 Telephone: (212) 336-2000 Fax: (212) 336-2222 prforlenza@pbwt.com ehaas@pbwt.com Attorneys for Ambac Assurance Corporation and the Segregated Account of Ambac Assurance Corporation UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK weeeee x AMBAC ASSURANCE CORPORATION and THE SEGREGATED ACCOUNT OF AMBAC Index No, 08 Civ. 9464 (RMB) (THK) ASSURANCE CORPORATION, i Plaintiffs, ~ against - EMC MORTGAGE CORPORATION, BEAR, STEARNS & CO. INC. (now known as IP. MORGAN SECURITIES INC.), JAMES E. CAYNE, ALAN C. GREENBERG, WARREN J. SPECTOR, ALAN D. SCHWARTZ, THOMAS MARANO, JEFFREY MAYER, MICHAEL NIERENBERG, JEFFREY L. VERSCHLEISER, BARON SILVERSTEIN, and MARY HAGGERTY, Defendants. 41063550.NATURE OF THE ACTION... IL IL. THE PARTIES..... AL PLAINTIFFS sso B. THE “BEAR STEARNS” DEFENDANTS ci IE INDIVIDUAL DEFENDANTS... JURISDICTION AND VENUE.... BACKGROUND 23 ‘A. THE BEAR STEARNS MORTGAGE LOAN SECURITIZATION “MACHINE” .. A 23 1. Bear Stearns Controlled Every Aspect of the Securitization Process. . 24 2. Bear Stearns Churned Out Securitizations by Sacrificing Loan Quality..... 29 ‘The Individual Defendants Drove Bear Stearns’ Securitization Machine to Assume Inordinate Risk for Personal Gain B. _ BEAR STEARNS MADE MATERIALLY FALSE AND MISLEADING DISCLOSURES TO INDUCE PARTICIPATION IN ITS SECURITIZATIONS. a é sees 39 1, Bear Steams Made Materially False and Misleading Statements in Its Marketing Presentations and Deal Correspondence..... 2. Bear Steams Disseminated Materially False and Misleading Mortgage-Loan Tapes 3. Bear Steams Disseminated Materially False and Misleading Data Concerning the Historical Performance of Its Earlier Securitization... 47 4. Bear Stearns Knowingly Supplied Materially False and Misleading Information to Secure Rating Agency Ratings. 5. Bear Stearns Made Materially False and Misleading Representations and Disclosures in the Offering Documents to Market and Sell the Notes C. BEAR STEARNS FAILED TO DISCLOSE AND AFFIRMATIVELY CONCEALED MATERIAL FACTS TO INDUCE PARTICIPATION IN ITS SECURITIZATION: 1 Bear Stearns Knowingly Conducted and Concealed “Bad Due Diligence”... 4106355v.1