Wellington Management Co., Boston, had to make good on a $20 million mistake recently — a flesh wound for the money management giant in normal times but especially painful in a rocky business environment that last week prompted the company to execute its biggest layoffs in three decades.
Wellington, one of the industry's premier private partnerships, had to pony up more than $20 million to cover a loss suffered by client Blue Cross & Blue Shield of Massachusetts Inc., Boston, when the firm misdirected some new mandates, two sources confirmed.
One of the sources said Wellington had gotten four new allocations from the $833 million Blue Cross & Blue Shield retirement plans slated for three commingled funds and one separate account, but put all four into the separate account. The source didn't say how much new money was allocated to Wellington, other than the combined amount was “big.”
Officials overseeing the Blue Cross/Blue Shield retirement plans noticed the mistake less than two months after it was made. By that time, the value of the misplaced holdings had declined by $20 million more than if the money had been invested according to instructions. Money managers familiar with the situation say Wellington fully compensated Blue Cross & Blue Shield for the loss.
Allen Maltz, chief financial officer at Blue Cross/Blue Shield, wouldn't be interviewed for this story, a spokeswoman said in an e-mail. A call to Perry Traquina, Wellington's president and chief executive officer, was referred to spokeswoman Lisa D. Finkel, who declined to comment.
Industry veterans said such mistakes occur all too frequently. They praised Wellington for quickly making the client whole. One Wellington pension fund client said it's not the mistake that counts, it's the response, and Wellington's response is just what you'd expect from a first-rate firm. The executive, who declined to be named, didn't have first-hand knowledge of the Blue Cross & Blue Shield situation.