State Street Corp. is suing three of its former executives for conducting what it called an “employee raid” of the bank’s securities lending business and violating confidentiality agreements to establish a new securities-lending company to compete with the bank.
The complaint, filed June 23 in Massachusetts Superior Court in Boston, seeks an injunction and damages from Craig V. Starble, Peter A. Economou, Paul F. Lynch and the company they created, Premier Global Securities Lending.
The suit alleges that Mr. Starble, formerly an executive vice president and head of State Street’s global securities finance division until his departure in March 2009, recruited eight of his former colleagues to join PGSL, a third-party securities lending agent that he founded in October 2009.
According to court documents, Mr. Starble in April proposed that State Street “carve out” its securities-lending business and set it up as a separate business in a joint venture with PGSL. After State Street rejected the offer, the complaint alleges that Mr. Starble persuaded Mr. Economou, who replaced Mr. Starble as executive vice president and division head of securities finance in March 2009, and Mr. Lynch, senior managing director and division head of trading management, to join PGSL.
Messrs. Economou and Lynch were accused in the suit of actively recruiting six other State Street securities-lending employees to join PSGL. The group included senior managing directors Suzanne N. Lee, head of account management and sales; Michael Landolfi, head of global operations; and Michael P. McAuley, head of product development; and managing directors William E. Locke, trading desk manager; Lawrence Albaugh, client service manager; and Oberon S. Knapp, client service manager. All eight State Street employees resigned June 15, according to court documents.
State Street’s suit alleges that all three defendants violated agreements they signed regarding confidential information they gained about State Street’s securities lending business in the course of their employment. The suit further alleges that among other offenses, the three former executives are guilty of breach of contract, breach of covenant of good faith and fair dealing, breach of fiduciary duty and interference of business practice.
None of the three defendants could be reached for comment. PGSL operates out of Mr. Starble’s home, according to court documents, and a separate business telephone number is not available.
Barbara A. Robb, partner at Shilepsky Hartley Robb Casey Michon and counsel for Messrs. Economou and Lynch, declined to comment.
Jyotin Hamid, partner at Debevoise & Plimpton and attorney for Mr. Starble and PGSL, provided the following statement on behalf of the company: “We believe this lawsuit is meritless, and we categorically reject any allegation of wrongdoing. … We intend to vigorously defend the lawsuit.” The statement also avowed that none of the eight employees signed a non-compete agreement with State Street.
“State Street requires its senior managers adhere to their employment and confidentiality agreements to protect the interests of its clients, investors and employees. State Street believes that these former employees breached their obligations to State Street and we intend to protect the company against this wrongdoing,” according to a company statement provided by Alicia Curran Sweeney, a State Street spokeswoman.