In re State Street Corporation Securities Litigation
|Court:||United States District Court, District of Massachusetts|
|Judge:||Hon. Nancy Gertner|
|Case Contacts:||Steven B. Singer, John C. Browne, , Katherine A. Stefanou, Evan Berkow|
This is a securities class action based on a series of misrepresentations made by State Street over several years. In short, in the midst of the market turmoil of the past few years, State Street repeatedly made false statements about the quality of its own internal investment portfolio and the legality and sustainability of its revenues and profits. When the truth was revealed to the market, State Street's stock declined nearly 70 percent and over $9 billion of shareholder value was destroyed.
On May 7, 2010, the Honorable Nancy Gertner of the District Court for the District of Massachusetts appointed Public Employees' Retirement System of Mississippi and Union Asset Management Holding AG as Lead Plaintiffs and BLB&G as co-Lead Counsel for the Class.
State Street is a publicly traded company based in Boston that describes itself as "the world's biggest money manager." State Street marketed itself in its SEC filings and in other statements to investors as a "conservative" company and consistently emphasized its "reputation for stability and safety." As the market began to decline due to losses in the real estate and housing sectors in 2007 and 2008, State Street repeatedly assured investors that its investment portfolio was sound and its revenues and earnings strong. For instance, in July 2008, State Street told investors that "it was forecasting no write-downs tied to the collapse of the subprime mortgage market." Similarly, on October 15, 2008, State Street stated that "the asset quality of our investment portfolio remains high." These and other statements were revealed to be false on January 20, 2009, when State street announced that one of the largest assets in State Street's own investment portfolio — something called off-balance sheet "conduits" — had in fact suffered enormous losses and State Street would have to write down more than $9 billion in value. This caused State Street's stock price to decline from $36 per share on January 16 to less than $15 per share on January 20 — a drop of more than 60% in a single day.
Investors received additional bad news about State Street on October 20, 2009, when the Attorney General for the State of California announced he was filing a complaint demonstrating that State Street had committed what the Attorney General termed "an unconscionable fraud" by illegally overcharging its investment clients for the costs of executing foreign currency trades. When executing foreign currency trades for its investment clients — including large public pension funds — State Street was contractually obligated to charge the interbank rate at the time of the trade. Instead of doing so, State Street would wait until the end of the day to "book" the transaction and would charge the highest interbank rate of the day. State Street faces stiff fines and penalties (estimates to be as much as $200 million) as a result of the California AG's investigation. In addition, it appears that this fraudulent "foreign currency exchange" scheme artificially inflated State Street's revenues by possibly hundreds of millions of dollars between 2001 and 2009. Upon the disclosure of the Attorney General's lawsuit, State Street's shares dropped a further 8%.