BATON ROUGE — The Louisiana Firefighters’ Retirement System and other public pension funds have settled a lawsuit with Northern Trust in regards to a lending program.
According to a Nov. 22, 2016 Plan Sponsor article, Northern Trust agreed to settle the case — Firefighters’ Retirement System v. Northern Trust — that was brought by multiple public pension funds alleging that Northern Trust “breached its fiduciary duties and its contract related to the funds’ investment in the securities-lending program.”
“The firm will pay $4,250,000 to settle the suit,” the article said. “Northern Trust has expressly denied all assertions of wrongdoing or liability against it, and agreed to enter into the settlement solely to avoid the uncertainty, burden and expense of protracted litigation.”
The settlement was approved Jan. 11 by U.S. District Judge Jorge L. Alonso in Illinois, according to www.law360.com.
Other public pensions represented in the suit include the Public School Teachers’ Pension and Retirement Fund of Chicago, the Board of Trustees of the Pontiac Police and Fire Retirement System and the Board of Trustees of the City of Pontiac General Employees Retirement System
“(These public pensions) filed the lawsuit on behalf of themselves and all others similarly situated,” the article said. “The lawsuit alleged that Northern Trust improperly invested collateral received to secure the loan of securities from its Commingled Lending Funds and/or collateral received to secure the loan of securities from the portfolio of a client that participated directly in Northern Trust’s securities lending program.”
In a Feb. 28, 2012 Plan Sponsor article, it was explained that in February 2012, Northern Trust attempted to transfer blame of any losses onto the funds’ boards, but their efforts failed.
“Northern Trust filed its own complaint for equitable and implied indemnification; and/or contribution against the third-party defendants who are the boards of trustees of the individual plaintiff retirement funds,” the February 2012 article said. “Northern Trust alleged that it was the boards that chose to participate in the securities lending program, selected their own investment guidelines, knew precisely how defendants were implementing the guidelines and made the affirmative decision to ‘stay the course.’”
According to the 2012 suit decision, U.S. District Judge Robert W. Gettleman of the U.S. District Court for the Northern District of Illinois ruled that any duty the boards may owe to plaintiffs arises from their positions as trustees.
“Any duty owed by defendants comes from their contractual agreements and their position as investment managers,” the 2012 court document said.
The plaintiffs’ attorneys argued, and the court agreed, that Northern Trust failed to make a reasoned determination of the quality and suitability of collateral investment and that there was no joint obligation owed to plaintiffs by the boards and Northern Trust. This decision led to the current settlement at hand.