Exxon Pension Fund Sues Northern Trust Alleging "Massive Losses"

[girl gone mad]

Smoking Gun Exclusive: Exxon Pension Fund Sues Northern Trust Alleging "Massive Losses"
Posted by Tyler Durden at 7:28 PM
http://zerohedge.blogspot.com/2009/03/smoking-gun-exxon-pension-fund-files.html">Zero Hedge

And Northern Trust thought it had problems when Barney Frank went postal for the company's House Of Blues romp. A smoking gun lawsuit filed March 30 in Northern Illinois District Court (09-cv-01934) by Joseph Diebold on behalf of the pension scheme of one of the world's largest companies, Exxon Mobil, alleges Northern Trust breached its fiduciary responsibility under ERISA and claims Northern Trust invested the fund's capital since 2007 "recklessly and imprudently, by acting disloyally and causing massive losses."

One could surmise that Northern Trust, despite having pledged to repay its $1.6 billion in TARP funding, should at this point promptly change its mind and keep that cash, as this lawsuit may potentially have staggering adverse consequences.

This could be a seachange in terms of corporate pension funds, who are on the hook for massive losses, turning their anger instead at pension plan custodians and managers.

In a nutshell, the lawsuit purports that collateral collected from lending out of shares, had been invested too riskily by Northern Trust. Pension schemes traditionally use custodians and investment managers to lend out certain securities in their portfolios to hedge funds and other third parties. In exchange, the schemes receive collateral payments that are further invested to create additional returns. As once securities are returned the collateral has to be repaid immediately, investors generically prefer investing in liquid, low-risk assets. It appears this is where NTRS has made a big blunder, and effectively ended up generating losses for the ExxonMobil pension estate.

The Exxon Mobil pension fund, which is represented in the lawsuit by Joseph Diebold, Jr., and is pursuing class action status, was worth $13 billion at the end of 2007, and states in the lawsuit that "defendants inappropriately invested the collateral in collateral pools that were illiquid, highly-leveraged, and unduly risky, containing mortgage-backed securities and other securitized debt instruments. These investments were inappropriately risky for retirement plan investments - especially when compared to the relatively small amount of gains that the plans could expect to receive from securities lending arrangements."

http://zerohedge.blogspot.com/2009/03/smoking-gun-exxon-pension-fund-files.html">More...

[Po_d Mainiac]

1. So read

u wanna short the shit out of our holdings, and trash the fund............be our guest.