Religious order sues State Street, SSgA over losses

Sisters of Charity of the Blessed Virgin Mary, Dubuque, Iowa, filed a civil suit against State Street Bank and Trust and SSgA, alleging breach of fiduciary duty, breach of trust and unjust enrichment regarding losses from the order’s investment in an SSgA enhanced Dow Jones-AIG Commodities futures strategy.

According to the complaint, filed in U.S. District Court in New York, the religious order’s cash collateral pool for the SSgA fund was invested in the firm’s long duration bond strategy, which was described as being conservative.

The complaint alleges that in late 2006, SSgA “deviated from its stated strategy for the LBD (bond) strategy and directed assets into leveraged positions of high-risk investments, including mortgage-backed securities, exposing the strategy to enormous risk.”

The complaint alleges that as of July 31, 2007, the order’s collateral pool investment was leveraged 6-to-1 and that the strategy suffered losses and underperformed its benchmark as a result of its exposure to subprime mortgages through the end of July 2007.

The complaint seeks damages, recompense of fees SSgA and State Street collected on the investment, and profits the order would have made had the entities not been imprudent in their investment.

Angie J. Connolly, the order’s communications director, declined to provide the size of the investment, or how much the order lost through the investment. The order hired SSgA in spring 2005 and terminated the relationship in 2007, Ms. Connolly said in an e-mail response to questions.

State Street and SSgA “will vigorously defend ourselves against inappropriate claims, including those that arise from investment losses caused by market conditions,” said Arlene Roberts, a company spokeswoman.

Related Topics: State Street Global Advisors