State Treasurer Curtis Loftis Authorizes Lawsuit Against Major Bank
January 27, 2011
(Columbia, SC) – Late Wednesday afternoon State Treasurer Curtis Loftis, on behalf of the State Treasurer’s Office, filed an action against the Bank of New York Mellon Corporation and the Bank of New York Mellon.The suit seeks to recover losses suffered by the State as a result of what the Treasurer’s Office believes was the Bank’s failure to adhere to investment guidelines in a securities lending program contract and the Bank’s failure to honor its obligations and responsibilities in managing a portion of the State’s investment portfolio.
Treasurer Loftis seeks to recover damages which are currently estimated at approximately $200 million. “Our contract called for investments limited to conservative, high quality instruments,” Treasurer Loftis said. “The Bank inappropriately invested in mortgage backed securities comprised of subprime mortgages with maturity dates greater than allowed. Also, the Bank invested in certain debt instruments in the now bankrupt Lehman Brothers investment bank. Because of the contract violations, the State has suffered a $200 million dollar loss.
“We allege that the Bank of New York Mellon has violated its agreement with the State of South Carolina, and breached its fiduciary duties. We have filed suit in order to bring this matter to an orderly, lawful conclusion.”The discovery of these problems and engagement of counsel occurred during the previous administration. Since his inauguration, Treasurer Curtis Loftis and his staff have extensively reviewed the matter and consulted with counsel, who has made amendments to the proposed pleadings. After a complete review of the issue, Treasurer Loftis has determined that the filing of this action is in the best interests of the people of the State and has authorized counsel to move forward with the case.
The suit was filed in state court by the firms of Willoughby and Hoefer, PA and Montgomery and Willard LLCon behalf of the State.
“The bank is liable for the losses incurred and my administration will continue to work with counsel to recover every penny due to the citizens of South Carolina,” Treasurer Loftis said.