State Street Settles Shareholder Lawsuits for $70 Million

State Street has agreed to a $70 million cash settlement, pending court approval, for three related class action lawsuits alleging that the bank’s FX overcharging and misrepresentation of commercial paper values caused the plaintiffs to buy the company’s stock at an improperly valued price.
By Jake Safane(2147484770)
State Street has agreed to a $70 million cash settlement, pending court approval, for three related class action lawsuits alleging that the bank’s FX overcharging and misrepresentation of commercial paper values caused the plaintiffs to buy the company’s stock at an improperly valued price.

In settling these three cases, State Street does not admit any wrongdoing. “State Street is pleased to put these matters behind us,” the bank said in a statement. “We continue to deny the allegations made in these lawsuits, and believe that they lacked merit. We agreed that the cases should be settled to eliminate the uncertainty, distraction, burden and expense of continued litigation.”

One suit, led by Public Employees’ Retirement System of Mississippi (MPERS) and Germany’s Union Asset Management, settled for $60 million, while two others settled together for $10 million, each led by a former State Street employee on behalf of other employees who purchased State Street stock through the company’s retirement plan.

Between October 17, 2006, and October 19, 2009, State Street allegedly deceived its investors by charging its clients a different exchange rate than the one the bank actually used to execute FX trades, while the bank also allegedly misled investors by assuring them in the fall of 2008 that it held high-quality commercial paper in its portfolio.

The defendants complain that when State Street announced huge losses from this portfolio in January 2009, the share price tumbled, thereby hurting the defendants who had previously purchased State Street’s stock. Furthermore, the defendants note that the share price fell when California’s attorney general sued the bank later that year for alleged FX misconduct (a separate case, though one in which these shareholder suits cite as part of the basis for their claims).

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