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Fidelity Moving Jobs Has Massachusetts Calling for Clawbacks

Massachusetts wants Fidelity Investments to pay a price for moving jobs out of state.

Fidelity, the second-largest U.S. mutual-fund company, said this week it’s closing offices in the state with about 1,100 employees, relocating most of them to New Hampshire and Rhode Island. Mark Montigny, state Senate chairman of the Post Audit Committee, said he scheduled a March 29 hearing to discuss ways to penalize companies like Fidelity should they receive state tax breaks and other subsidies and then move jobs.

“Fidelity has not only benefited from massive tax breaks and broken the agreement, but there ought to be very significant clawback provisions for its actions,” Montigny, a Democrat, said in an interview.

Montigny said he will invite Fidelity Chairman Edward C. “Ned” Johnson III to explain the relocation of employees. He also intends to ask state Revenue Commissioner Navjeet Bal to outline how much money Fidelity has received from the state since 1996. The state approved a bill that year to create tax incentives for the mutual-fund industry after Boston-based Fidelity lobbied for its passage, Montigny said.

As part of the tax bill, fund companies had to create a certain number of jobs, Montigny said. That requirement ended after five years.

“We have met and exceeded our commitments to the state and will continue to do so in the future,” Anne Crowley, a spokeswoman for Fidelity, said in an e-mailed statement. “All of the business decisions we have made over the years are with the intent to keep our company stable, strong and healthy. That is good for our employees and for Massachusetts.”

‘All Facts’

Fidelity, which is closely held, manages about $1.6 trillion in assets. State law doesn’t allow disclosure of the amount of tax breaks the firm has received, said Robert Bliss, a spokesman for the revenue department.

Senate President Therese Murray, also a Democrat, said in a statement that she wanted “all the facts” of Fidelity’s decision.

“It is very disappointing to be blindsided by a homegrown company that has benefited greatly from its long relationship with the Commonwealth,” she said.

Fidelity is not alone in moving jobs out of the state. In January, Evergreen Solar Inc. of Marlborough, Massachusetts, announced it was closing a manufacturing facility. The state, which had provided $58 million in grants, tax breaks and other benefits, recouped $3 million, the Boston Globe reported Jan. 19. The company also forfeited $20 million of $21 million future tax breaks, according to the report.

Job Cuts

Fidelity, started by Ned Johnson’s father in 1946, has expanded from its fund-company roots into stock trading, retirement plans and institutional money management. The company over the past decade expanded in states including Florida, Rhode Island and North Carolina. Fidelity employs 37,000 people, including 8,400 in Massachusetts.

The firm suffered from investor withdrawals and declining assets during the financial market crisis in 2008 and 2009, prompting it to cut about 3,000 jobs to lower expenses. Vanguard Group Inc. passed Fidelity last year to become the largest U.S. mutual fund company by assets, a distinction Fidelity had held for more than two decades.

Last week the company reported a 17 percent increase in earnings for 2010. Operating income, which excludes costs such as interest and taxes, rose to $2.94 billion last year from $2.51 billion a year earlier.

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