The staid world of securities lending was jolted in mid-June by the news of the single-day exodus of eight senior executives from State Street Corp.'s global securities finance unit.
What wasn't clear at that time was that the octet was joining their former boss, Craig V. Starble, who was executive vice president of the securities lending finance unit until March 2009, in a new company, Premier Global Securities Lending LLC.
What also wasn't apparent at the outset was the extent to which Boston-based State Street was prepared to protect its securities lending business from competition from the team that once ran that business.
To that end, State Street is suing three of its former executives for what it called an “employee raid” of the bank's securities-lending business and violating confidentiality agreements in the establishment of the new company.
The complaint, filed June 23 in Massachusetts Superior Court in Boston, was filed against Mr. Starble; two of the recent departures, Peter A. Economou and Paul F. Lynch; and Premier Global Securities Lending. Injunctions are being sought to prohibit the recruitment of more State Street employees to PGSL; the solicitation of State Street's securities lending clients; and the use of any confidential State Street information. State Street's suit also seeks unspecified damages and legal costs.
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 executives rejected the offer, the complaint alleges 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. They are 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.