Bear Stearns: Smooth operators.

Thanks to a secret settlement, a small group of Bear Stearns investors is getting back every cent they lost. The Daily Beast's William D. Cohan on who's pocketing $1 million checks—and why Wall Street is furious.

By William D. Cohan / Daily Beast

A small group of lucky Massachusetts investors in two now-defunct and worthless Bear Stearns hedge funds received an unexpected Christmas windfall: the return of 100 percent of their original investment in the billion-dollar funds.
The checks—some for as much as $1 million—were sent to the investors last month, after a confidential settlement between the state of Massachusetts and Bear Stearns Asset Management Inc., which is now owned by JPMorgan Chase.

"My investment in these two hedge funds turned out to be one of the best investments I made in 2007," joked one very happy investor, who got all his money back in the settlement. "I should have invested more."

William F. Galvin, the Massachusetts secretary of state, orchestrated the November settlement, which all sides agreed to keep confidential. But word of the deal has spread like wildfire and sparked a furor among the hundreds of other investors in the Bear Stearns hedge funds who were not fortunate enough to live in Massachusetts. Some lost all of their investment in the two funds, and many others received only a small portion of their money back.

They are wondering what prompted the unexpected settlement in Massachusetts and why the lead attorneys in other states have not pursued a similar deal with JPMorgan Chase. They want more of their money back, too.

One investor was told by a JPMorgan lawyer that Galvin "put a gun to our head" to agree to the settlement.

Investors frustrated by the secret settlement include billionaire Daniel Snyder, the principal owner of the Washington Redskins, who invested more than $1 million in the funds; Doug Sharon, the former head of Bear Stearns' Boston office; and Shelly Bergman, another longtime Bear Stearns stockbroker. Sharon and Bergman both now work as brokers at Morgan Stanley and were among the largest employee investors in the hedge funds.