Project Neptune rising…

Project Neptune rising…

… amid renewed liquidity concerns

Turkey looks to diversify infrastructure debt

Turkey looks to diversify infrastructure debt

Banks not be able to shoulder the debt burden

April 2010

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Legal action against State Street


• Securities lending actions

Berman DeValerio class action
Complaint filed January 2010. Alleges that State Street misled investors regarding its exposure to losses in off-balance-sheet conduits, securities lending and its own investment portfolio. Also alleges fraudulent pricing of FX trades. Pending.

Carpenters Labor Management Pension Fund
Case filed in December 2009 claiming that investment in the Russell 1000 Value Lending fund led to illiquidity due to investment in asset-backed securities. Pending.

Public School Retirement System of Missouri
Case filed in September 2009. Lawsuit threatens to reduce the value of the remaining $1.5 billion investment in Quality D securities lending collateral pool unless state entity returns $4.2 billion of the lending fund to provide liquidity. Pending.

Fishman, Haygood, Phelps, Walmsley, Willis and Swanson
Filed in April 2009. Class action on behalf of Erisa plans invested in securities lending programme, alleging investment in "highly risky, illiquid, long-term investments" instead of high-quality, liquid instruments. Pending.


• Erisa actions
Twenty-one Erisa actions have also been brought against State Street over its management of various plans. Claims include knowingly holding imprudent investments, misrepresentation and mismanagement and investing in risky MBS. Seven cases have been dismissed and one preliminary class settlement approved. State Street announced in November 2009 that it had entered into a proposed $89.75 million settlement, subject to court approval. 

•  SSgA

Settlements with SEC and Massachusetts Securities Division
In February State Street (SSgA) agreed to settle various state and federal charges associated with misleading investors over the funds’ exposure to sub-prime investments, use of derivatives and leverage. State Street was alleged to have provided certain investors with more complete information than others. State Street agreed to pay a $10 million civil penalty, pay $300 million into a fund to compensate investors and pay an additional $79 million if a related Erisa class action was not settled by March 17.

SSgA Yield Plus Fund/Ning Yu
Filed June 2008. Alleged material misrepresentation in offering documents. Case dismissed February 2010.

SSgA/Mediq Pensioenfonds OPG
Alleged transferral of fund securities to Lehman Brothers to be commingled with Lehman assets. Claims State Street failed to disclose risk to investors. A Dutch court ruled against SSgA in December 2009 awarding a €40 million settlement to Mediq.

SSgA World Index Plus Edge Common Trust Fund/Stichting Pensioenfonds British American Tobacco
SSgA Europe Index Plus Edge Common Trust Fund/Stichting Pensioenfonds Medewerkers Apotheken
Filed December 2009 and February 2010. Alleges transfer of fund securities to Lehman Brothers to be commingled with Lehman assets. Claims State Street failed to disclose risk to investors. 


• Foreign exchange

Kendall Law Group class action
Alleged misleading statements relating to the mark-up of FX trades. Filed February 2010 in the District of Massachusetts.

California attorney general
Filed October 2009 alleges "unconscionable fraud" against California’s two largest pension funds for illegally overcharging for FX trades. State Street has categorically denied any allegation of wrongdoing.



See also:
The case against State Street
What State Street says...