State Street Sued Over Stock-Loss Allegations

January 20, 2010 (PLANSPONSOR.com) – State Street Corporation has been hit with a lawsuit alleging investors in the company’s shares between October 2006 and October 2009 lost money because State Street was not truthful about being exposed to billions of dollars in losses.

The suit, filed by Boston law firm Berman DeValerio, seeks class-action status to represent State Street shareholders during the three-year period including those who purchased common stock during a 2008 public offering.

According to the suit, filed in federal court in Boston, State Street violated federal securities laws through its financial disclosures and securities regulatory filings during the 2006 to 2009 period.  A law firm announcement said the suit charged State Street with “misleading investors about the Company’s exposure to billions of dollars in losses arising from off-balance-sheet conduits, the Company’s securities lending program and its own investment portfolio” (see Cover:Plowing New Fields).

The announcement continued: “Instead of disclosing these mounting problems, the complaint alleges, State Street sought to shore up its capital position by issuing materially false and misleading materials, filed with the SEC, that enabled the company to raise approximately $2.8 billion in the June 2008 Offering.”

The law firm said when State Street’s financial difficulties came to light, the value of its shares decreased the firm’s market capitalization by $9 billion in one day when shares fell from $36.25 on January 16, 2009, to $14.89 on January 20, 2009, the next trading session.

State Street shares fell another $4.41 per share in October 2009 after allegations were made public that the company had been overcharging institutional clients as part of foreign currency trades, according to the announcement. State Street already faces several suits over the foreign currency trading allegations (see State Street Hit with Forex Overcharge Suit).

The Berman DeValerio complaint is available here.

Fred Schneyer
editors@plansponsor.com