The School Employees Retirement System of Ohio (SERS) has filed a lawsuit in a US District Court against Wachovia, Wells Fargo (which has merged with Wachovia) and Metropolitan West Securities (a servicing division of Wachovia) over losses it claims resulted from Wachovias mismanagement of its securities lending portfolio.
According to Ted Hart, spokesman for the Ohio attorney general, the case seeks to recover nearly $30 million in losses directly related to its securities lending activities. A SERS spokesman declined to comment further.
“Wachovia Global Securities Lending denies the allegations made in this lawsuit and will vigorously defend the case, Wachovia spokeswoman Laura Fay told Global Custodian. All the investments were highly rated at the time of purchase. We are confident that Wachovia acted appropriately and in accordance with our clients’ best interests at all times.”
The case, filed in the Ohio Southern District Court, follows a trend of public organizations suing banks over securities lending, both in the US and elsewhere. Wells Fargo paid $30.1 million in June to a US workers compensation group over risky securities lending programs. In November, Swedish pension AP1 sued BNY Mellon in London over securities lending losses. Those suits follow half a dozen others by beneficial owners against custodians in 2008-09.
Both SERS and the Ohio attorney general’s office have an obligation to protect the hard earned retirement investments of Ohios public school employees, the attorney generals office said in the statement provided by Hart.