Prudential Financial sues State Street
Prudential has sued State Street over mortgage-related losses affecting its retirement-plan clients.
Prudential Financial Inc. has sued State Street Corp. over mortgage-related losses that have affected Prudential’s retirement-plan clients.
The suit was filed yesterday in a Manhattan federal court.
The Newark, N.J.-based firm’s subsidiary, Prudential Retirement Insurance and Annuity Co., seeks restitution from the Boston-based money manager, saying that State Street “failed to exercise the standard of care of a prudent investment manager,” according to a filing with the Securities and Exchange Commission.
Prudential has accused State Street of changing the investment strategies of two bond funds to make undisclosed investments in mortgage-related assets — some of which were linked to subprime home loans, Bloomberg reported.
Some 28,000 retirement plan participants lost money when the bond funds fell below their benchmarks by 14% and 28%, Bloomberg reported.
In its filing with the SEC, Prudential indicated that it would cost about $80 million to repay the clients and cover related costs.
This sum will take a chunk out of the firm’s third quarter financials, the filing said.
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