BNY Mellon has agreed to settle a class action lawsuit initially brought against it by the Oklahoma-based insurance company CompSource over losses incurred by the 2008 collapse of Sigma Finance, a structured investment vehicle.
The bank listed a pre-tax charge of $350 million in the second quarter of 2012, of which $280 million is expected to be paid in a settlement.
CompSource and the members of the lawsuits class allege that BNY Mellon lost a substantial amount of their cash collateral in medium-term notes that it had invested in Sigma Finance through a securities lending program.
Pending approval in Oklahoma federal court, the settlement could conclude the class action suit, which was initially filed on Dec. 19, 2008.
Lawyers from Nix Patterson & Roach, which represents CompSource, did not immediately respond to a request for a comment.
“The Sigma settlement agreement reflects the meaningful progress we are making in navigating the litigation environment that affects our company and the industry overall, says Gerald Hassell, chairman, president and CEO of BNY Mellon. We are putting this litigation behind us, with no significant impact on our capital position, while continuing to make headway on other matters.
Investments in Sigma Finance, which collapsed in late 2008, have been the cause of several lawsuits against major banks. J.P. Morgan recently agreed to a $150 million settlement to a pension fund over money supposedly lost through Sigma, and BNY Mellon itself was sued by Swedish pension manager Frsta AP-fonden over the same issue in 2010.
The CompSource case is In re: CompSource Oklahoma, et al v BNY Mellon and The Bank of New York Mellon, U.S. District Court, Eastern District of Oklahoma, No.09-469.
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