Northern Trust Corp. will pay $36 million to settle a class-action lawsuit filed by 1,500 retirement plans that accused the firm of causing large losses stemming from the bank’s securities lending program during the financial crisis, said a news release Wednesday from one law firm representing the plans.
Todd Collins, an attorney with the Philadelphia law firm Berger & Montague called the settlement “an excellent recovery” in a statement e-mailed to Pensions & Investments.
“Plaintiffs and the class of ERISA retirement plans faced substantial risks in seeking to prove their claims of imprudent investing and excessive fees,” Mr. Collins said. “The litigation advances the principle that ERISA fiduciaries must be, and will be, held to the highest standards.”
The plans claimed Northern Trust invested collateral posted by borrowers of the securities in risky investments: subprime mortgages, special investment vehicles, and long-term floating notes, resulting in hundreds of millions of dollars in losses for the retirement funds.
Among the plans that had filed the suit were the ExxonMobil Savings Plan, Irving, Texas, and Texas Instruments 401(k) Savings Plan, Dallas, according to court filings. The plans had $23.75 billion and $3.57 billion in assets, respectively, as of Dec. 31, 2013, according to 11-K filings.
A settlement was announced in January 2014, but the details of the agreement had been worked out over the last 15 months between Northern Trust and the 401(k) and pension funds.
Papers announcing the settlement were filed late Wednesday in the U.S. District Court in Chicago.
“Plaintiffs in two cases filed motions (Wednesday) to settle alleged class-action lawsuits arising out of client investments in certain Northern Trust funds that had experienced losses from securities lending during the financial crisis,” a Northern Trust spokesman said in an e-mail. “More than a year ago, on Jan. 22, 2014, Northern Trust announced a $19.2 million pre-tax charge in connection with these two settlements. The plaintiffs’ motions in federal court in Chicago seek court approval for those previously announced settlements.”
