(Adds State Street comment, presiding judges' names)
By Jonathan Stempel
July 9 State Street Corp has reached $70
million in settlements to end three lawsuits claiming it
inflated its share price by overcharging clients on foreign
exchange services and falsely representing that its investments
in mortgage-backed securities were safe.
According to court filings on Tuesday, the Boston-based
custodial bank settled shareholder class-action litigation for
$60 million, and will pay another $10 million to resolve two
lawsuits by employees who owned its stock in their retirement
The shareholder settlement requires approval by U.S.
District Judge George O'Toole, and the employee settlements
require approval by U.S. District Judge Denise Casper. Both
judges work in Boston.
"We continue to deny the allegations made in these
lawsuits," State Street said in a statement. "We agreed that the
cases should be settled to eliminate the uncertainty,
distraction, burden and expense of continued litigation."
Custodial banks such as State Street, Bank of New York
Mellon Corp and JPMorgan Chase & Co typically
provide back office and other services to clients.
Their currency services came under increased scrutiny after
the 2008 financial crisis as state and federal regulators as
well as pension funds began to question whether clients were
The State Street shareholders' lawsuit accused the bank of
imposing an "undisclosed and unauthorized markup" on clients,
potentially adding hundreds of millions of dollars in revenue.
It said State Street's shares tumbled 8.4 percent on Oct.
20, 2009, after California sued the bank over alleged
overcharges to that state's largest public pension funds,
CalPERS and CalSTRS. State Street also cut its full-year outlook
The lawsuit also sought damages for a 59 percent plunge in
State Street's share price on Jan. 20, 2009, when the bank
reported $10 billion of unrealized losses in its investment
portfolio and off-balance-sheet "conduits."
It said this occurred only a few months after State Street
told investors its assets were "high-quality," and performing
well, despite the financial crisis.
The $60 million settlement also resolves claims against
State Street officials like former Chief Executive Ronald Logue
as well as various underwriting banks.
"We are pleased to have achieved this significant settlement
on behalf of investors in what was an extremely hard-fought
litigation," said John Browne, a partner at Bernstein Litowitz
Berger & Grossmann, which with the firm Motley Rice are co-lead
counsel for the lead plaintiffs, the Public Employees'
Retirement System of Mississippi and Germany's Union Asset
Management Holding AG.
The cases are in the U.S. District Court, District of
Massachusetts. They are Hill v. State Street Corp et al, No.
09-12146; Kenney v. State Street Corp et al, No. 09-10750; and
Richard v State Street Corp et al, No. 10-10184.
(Reporting by Jonathan Stempel in New York; Editing by G Crosse
and Jonathan Oatis)