Barclays (NYSE: BCS) claims in its lawsuit filed yesterday against Bear Stearns Asset Management (BSAM) and other related parties that the "BSAM Defendants concealed the fund's falling net asset value ("NAV") from Barclays and investors in the related feeder funds ... This cover-up and failure to respond in accordance with BSAM's fiduciary duties to Barclays only caused greater losses and a more spectacular collapse of the Enhanced Fund."

Barclays also claims that Bear Stearns (NYSE: BSC), as part of this cover-up, tried to save its skin by making plans to sell another investment, Everquest IPO, to "improperly offload poor quality CDOs" and thereby "to offload its risk to the public." It calls the BSAM portfolios "dumping grounds for toxic assets, including many Bear Stearns-related assets."

As you read the lawsuit, you get an upfront and personal look at the behind-the-scenes dealings of CDOs and how little was truly known about their values. Barclays insists that they were promised the portfolio for their leverage investment would not include the risky investment vehicles that ultimately imploded in this portfolio in May. The lawsuit includes an extensive set of "Investment Guidelines" that were signed, spelling out the level of risk Barclays would accept.

A Bear Stearns spokeswoman told Bloomberg they had not yet seen the suit, but said, "This lawsuit is an attempt by Barclays to avoid taking responsibility for its own actions" and that Barclays made "its own assessments that did not anticipate what, in hindsight, turned out to be a historically difficult market.''