The pension funds allege in their complaint that BNY Mellon encouraged them to join its securities lending program, under which the bank would lend securities owned by the funds to creditworthy borrowers. The funds viewed the program as “akin to a conservative money market account,” according to the complaint filed yesterday in federal court in New York.
The bank invested in Lehman notes in 2006 on behalf of the pension funds and continued to maintain the investments as uncertainty surrounding Lehman grew, the funds said.
BNY Mellon, based in New York, breached its fiduciary duty to the pension funds for city employees, including police officers and firefighters, they said in their complaint. The funds seek to represent a group of investors that together lost more than $1 billion in the notes.
Kevin Heine, a BNY Mellon spokesman, had no immediate comment yesterday.
The case is General Retirement System of the City of Detroit v. BNY Mellon N.A., 11-06345, U.S. District Court, Southern District of New York (Manhattan).
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