STATE? NOT GREAT, SOME WORKERS SAY: STAID BOSTON FIRM FACES DISCRIMINATION CHARGES

One of the world’s largest — and most private — money managers is being kicked into the spotlight, in this case by a pink pump.

State Street Global Advisors, the nation’s third-largest money manager, with $458 billion in assets under management, has been contending with at least three claims of sex discrimination, including one that was settled last week.

Among the allegations: Male employees at the firm were awarded a pink high-heeled shoe by colleagues if they opted to go home to a wife or girlfriend rather than go out drinking with the guys; and the orgasmic moans from the famous Meg Ryan diner scene in the film “When Harry Met Sally” were played on the trading floor.

State Street Global, which is owned by State Street Bank and Trust, reached a settlement last week in a pregnancy discrimination case brought by former employee Lisa Chui. The size and terms of the settlement were not announced.

In a move that could have far-reaching implications for other Boston money managers, the Massachusetts Commission Against Discrimination, a state agency which hears bias cases, also ordered the bank to file a written outline of its anti-harassment and anti-discrimination measures. State Street complied with that request last week.

“They (the MCAD) have delivered a pretty strong message,” says James McAllen, chief executive of David L. Babson & Co. in Boston, which manages nearly $20 billion.

State Street declined to comment on the filing but industry sources say the company has formed two councils made up of a cross-section of employees to talk with senior management on various issues. The company is also considering plans to offer employees programs on leadership and “threat management.”

State Street’s troubles didn’t end with the settlement. Two other cases, brought by former manager Andrea Buffum and David Smith, a former employee for the company’s in-house computer hot line, have not yet been reviewed by the commission. If a hearing officer finds probable cause they would be heard in about a year.

The spate of complaints opens a window into State Street Global, which prefers to keep a low profile. That window reveals a boys-club atmosphere — sophomoric, locker-room antics and all, say critics.

“we do not tolerate” bias

“They just don’t get it,” says Nell Minow, a principal of Lens Inc., a $100 million activist investment fund in Washington, D.C., who tracks companies on labor practices and corporate governance. Many big money managers like State Street, she says, “are masters of their own universe, especially in a bull market.”

In a prepared statement issued last week, State Street spokeswoman Kari Murphy said: “We do not tolerate discrimination in any way, shape or form.” She also noted that the MCAD has recently dismissed several other cases against the bank for lack of probable cause.

If nothing else, the latest complaints are embarrassing for State Street, a firm that has made its fortune by not only managing money but quietly providing custodial services for $4 trillion in assets run by other companies. Nicholas A. Lopardo, its hard-charging chief executive, has been credited with building State Street Global from a sideline of the bank into an industry giant.

The Boston Globe has had a field day covering the complaints. It even went so far as to reprint a lengthy portion of a sworn deposition by Mr. Lopardo, during which he admitted to not having received any training in discrimination.

The big Boston money manager is hardly the first to be accused of discrimination. In fact, the number of gender discrimination cases reported to the National Association of Securities Dealers more than quadrupled over the past three years to 43 in 1997. Ten cases have been reported through the end of April.

A series of high-profile sexual harassment and discrimination cases involving companies from Merrill Lynch & Co. to Smith Barney Inc., has exposed the money management world as one that is still predominantly white, male and rife with bias.

Take the case of Lew Lieberbaum & Co., the brokerage firm, based in Garden City, N.Y., that recently forked out $1.75 million to settle a sexual harassment and discrimination suit brought by 17 former employees. Allegations against the firm ranged from reports that senior male executive exposed himself to a female employee to charges that strippers were invited to perform at the office.

Bias cases jar State Street Global

“It’s affected every aspect of our business,” says Janine Scafo, director of human resources at Lew Lieberbaum, which has changed its name to First Asset Management. “We’re certainly not making money like we used to.”

The complaints against State Street Global aren’t nearly as egregious. But one potentially damaging case looms.

This one involves David Smith, who says he was fired from State Street Global last August after reporting that a co-worker, Stephen Maldavir, allegedly broke into the firm’s electronic mail system and discovered that Smith and a fellow coworker, Patrick Jorstad, were gay and romantically involved. He also claims the incident aggravated his affliction with Crohn’s disease, a painful disorder that affects the digestive tract, and charges that the company refused to give him a week off to recuperate.

Mr. Smith has filed a complaint with the MCAD charging he was a victim of discrimination based both on his sexual orientation and physical disability. The agency has yet to act on the complaints.

“There is a very discriminatory atmosphere at State Street,” says Mr. Smith.

Mr. Maldavir maintains he never broke into the e-mail system but was given copies of the Smith-Jorstad e-mails by another worker. He says he was fired a few weeks later because he would not identify the source of the e-mail.

“It was never a gay thing,” Mr. Maldavir says. “I don’t want to sound (like a) cliche, but I have gay friends. My wife is a florist…it’s a gay industry.”

State Street’s Ms. Murphy declines to comment on the case. But the bank — for the first time — was a corporate sponsor in a gay pride parade held Saturday in Boston. Ms. Murphy says the bank’s sponsorship had no connection to the Smith case.

Meanwhile, Mr. Smith has embarked on a one-man crusade against State Street. In February, the Harvard graduate launched an elaborate Internet site devoted to his case as well as those of others (www.oak-id.com/wordonstreet). The site is also a repository of embarrassing information about State Street, including internal memoranda and affidavits.

Mr. Smith maintains the site has put him in contact with a number of past and present employees who feel they have been discriminated against by the bank.

He says, “The web site has given some cheer to people who have lost hope in the battle against State Street.”