Who Says the Courts Don't Have a Sense of Humor?

USCA Case Number 08-1397 for 8 Notice of Appeal, filed by Patrick A. Jorstad. (Ramos, Jeanette) (Entered: 04/01/2008)


April Fools' Day, and the Directors of State Street officially become Defendants-Appellees.

Fitting.

Of March Winds, April Showers, and Perfect Storms

The March winds have truly howled and roared around One Financial Center in Boston.


Just last week, State Street faced:

* Patrick Jorstad's appeal;

* Alan Brown's mediation;

* Revelations of heavy client asset outflows from SSgA, the poorly-run asset management division of State Street (i.e., clients voting no confidence in management with their feet); and

* News of ERISA client class action consolidation efforts.

Both the financial press and the analysts are beginning to take note of the matters discussed here, too.

And tomorrow is April Fool's Day. Some CEOs may want to call in sick. (Or, stupid, as the case may be.)

March winds, April showers, and perfect storms.

By the annual meeting date - moved to April 30th this year - that may well be the way we all remember 2008, on State Street.

April Fools steering the Clipper Ship, indeed.

Appeal Apparently Afoot!

Dated 03/24/08, item 8 shows up on the Public Access to Court Electronic Records (PACER) site at the U.S. District Court for the District of Massachusetts as follows.

NOTICE OF APPEAL as to 7 Order by Patrick A. Jorstad NOTICE TO COUNSEL: A Transcript Report/Order Form, which can be downloaded from the First Circuit Court of Appeals web site at http://www.ca1.uscourts.gov/clerks/transcript.htm MUST be completed and submitted to the Court of Appeals. Appeal Record due by 4/14/2008. (Abaid, Kimberly) (Entered: 03/25/2008)

Apparently, an appeal is afoot!

State Street's CEO and Directors Face Busy Litigation Week

As detailed last week, today is the deadline for Patrick Jorstad to file an appeal with the First Circuit Court of Appeals.

Then, on Wednesday, Alan Brown's lawsuit against State Street goes into mediation.

This could be a pivotal week for revelations about the Board of Directors.

Why Is State Street Trying to Silence Alan Brown?

On August 25, 2004, State Street announced the untimely passing of Tim Harbert, former head of SSgA (State Street Global Advisors, the asset management division of State Street). The press release stated that: Alan Brown, group chief investment officer and Peter Leahy, chief operating officer, have been appointed interim co-heads of State Street Global Advisors. They will report directly to Ron Logue.

Reporting directly to Ron Logue must have worn pretty thin, pretty quickly, for someone like Alan Brown.

It appears that being required to think - by someone much smarter than he is - wore thin for Logue, too; Logue doesn't like taking questions, or being made to think on his feet.

A mere five months into that ill-fitted interim appointment, Logue tapped William Hunt, his own personal pick, to replace Brown and Leahy. The press release announcing Logue's pick is dated January 31, 2005.

In a vain attempt to mollify Brown and to keep him on board the Clipper Ship, the Directors established a performance incentive plan for him, slated to last thru 2007. That action took place March 2, 2005, and was reported on March 8, 2005.

On March 16, 2005, State Street issued its proxy materials, which included Alan Brown as a key Named Executive Officer.

The very next day, the British Brown voted NO CONFIDENCE in Ron Logue's leadership.

Mudlark: Brown bids farewell to State Street
By Clay Harris, FT.com site
Published: Mar 17, 2005

Alan Brown's speech at this week's National Association of Pension Funds conference in Edinburgh could turn out to be his swan-song. He is leaving State Street Global Advisors, where he has been group chief investment officer since 1997. Brown, one of the stars of fund management and the first Briton to reach such an exalted position at a US-based investment group, confirmed that he was now on gardening leave but did not reveal his next move.

Plenty of industry ink was spilled, speculating as to why the well-respected Brown gave Logue the two-fingered salute. Other way around.



Judging by publicly filed court documents, Logue was the last to know that Alan had left the building. But it didn't take long for the dirty laundry to be aired.

On June 7, 2005, Alan Brown filed suit in the U.S. District Court for the District of Massachusetts. For anyone wishing to look up the court filings on the electronic database, the case number is: 05-cv-11178-NG, Brown v. State Street Corporation et al.. The case is pending before The Honorable Nancy J. Gertner, USDJ. Key documents from that casefile will be reproduced here, soon.

Ron Logue responded to questions about the lawsuit in the Financial Times on July 11, 2005:

Look up State Street on a news database and the stories that come up mostly focus on the staffing issues that have beset the fund management division of the company over the last year.

That is not what Ron Logue, chairman and chief executive, wants to focus on. He says the departure of Alan Brown, chief investment officer, in March this year, followed by London managing director Nigel Wightman, was the natural consequence of a change of command.

"Some people who think they should have been in charge aren't in charge - these things happen," he says.

The two men left following February's appointment of William Hunt to head State Street Global Advisors, replacing Tim Harbert, whose death in August 2004 left the role vacant.

Mr Logue maintains the talent pool at SSgA is sufficiently strong and experienced that the loss of the high profile Mr Brown has had no effect. Ironically, he says, SSgA is performing better than it has in the past, making a higher earnings contribution to the company. ... It's the dollar signs that light up his life: State Street's chief tells Pauline Skypala how he is changing the direction of the company to maximise earnings from fund management, by PAULINE SKYPALA, Financial Times, Jul 11, 2005. pg. 4

That name of that cologne he's wearing isn't Competence by Calvin Klein; it's Arrogance, a cheap knock-off.

Once the Financial Times ran that item, the American press started taking notice.

On December 15, 2005, this item appeared in The Patriot Ledger.

An ex-State Street Corp. executive is fighting his former employer in court over a buyout package that he claims was promised to him but never delivered.

Alan Brown claims in a lawsuit that David Spina, the financial services company's previous CEO, had promised that he could receive a buyout package like the ones offered to U.S. employees in 2003. Brown claims he was told his window for accepting the generous package would last five years.

Brown claims Spina, wanted to make sure Brown and another high- ranking executive in State Street's investment management arm, State Street Global Advisors, stayed during the big exodus of employees that year.

Brown, a London resident, left in March after he was passed over for the top post at State Street Global Advisors in January. Brown, who had been the subsidiary's chief investment officer, never got the severance package he says he was promised, a package worth "several million dollars," according to his lawsuit.

Brown also claims a similar arrangement was offered to Timothy Harbert, the chief executive of State Street Global Advisors at the time. Harbert died last year, creating the vacancy at the top of the division. Brown shared the role of running the division with another exec on an interim basis before State Street appointed William Hunt to the post in January.

Brown filed his lawsuit against State Street in June. The first hearing before a judge in federal court in Boston was held Monday, according to his lawyer. Hannah Grove, a spokeswoman for State Street, declined to comment on the lawsuit. In a response filed with the court last month, however, State Street denied that it owes Brown benefits associated with the voluntary severance package it offered U.S. employees in 2003. The company maintains that no such promise was made to Brown.

When that buyout plan was offered to employees in 2003, top executives were surprised when about 3,000 employees opted to go. The massive departures created some turmoil at the Boston-based company.

Brown, in his suit, says two of the top four State Street Global Advisors took the buyout, and top State Street officials became concerned that the other two, Brown and Harbert, would go as well.

"Their concern was that so many people were accepting this immediate buyout and leaving that they would be without top management at SSGA," said Harvey Schwartz, a Boston lawyer who represents Brown. Brown claims Spina promised him the buyout verbally in 2003, as well as in a letter dated June 30, 2004, the same day Spina announced his own retirement from the company.

"As an inducement to keep him there, they offered to extend the program to him and to make it available to him at his option at any time within five years," Schwartz said. "With the change in leadership (earlier this year), he notified (State Street) he was going to move forward under this plan, and they said, What plan?'"

Schwartz said he hopes the issue can be resolved at a trial by the end of 2006.

Schwartz said Brown, a well-known figure in the investment industry, turned down several offers while staying at State Street.

But Brown still landed on his feet, He took a top job at Schroders, a British fund manager, in the spring. And, in 2004, he was State Street's highest paid executive after current chief executive Ronald Logue, who replaced Spina last year. A filing with the Securities and Exchange Commission shows Brown received $3.4 million for 2004 in salary, bonus and long-term incentive payments. -- Former exec sues State Street: Brown claims firm promised buyout deal, then denied benefits, by JON CHESTO. The Patriot Ledger, Dec 15, 2005, pg. 18

On June 26, 2006, the Financial Times ran a follow-up item:

State Street, one of the world's largest institutional investors, last week rejected a Dollars 5m (Pounds 2.7m) claim from Alan Brown, its former chief of investment who is now an executive director of Schroders, the UK fund manager, over voluntary severance package benefits.

Following an amended complaint to the US courts made by Mr Brown in May, Boston-based State Street has denied that it breached a compensation agreement with Mr Brown made in 2003. Mr Brown, a Briton aged 53, resigned from State Street in March 2005. ...

SSgA said it planned to "vigorously defend its position in court".

In filings made to the US District Court in Boston, Massachusetts last week, State Street asked that Mr Brown's complaint be dismissed without prejudice.

Mr Brown and Schroders declined to comment. -- State Street rejects Dollars 5m claim, by KATE BURGESS and REBECCA KNIGHT, Financial Times, Jun 22, 2006, pg. 22

Time for another round of follow-up stories, apparently (and the smart money says that the press releases or teasers are probably already out, under embargo).

On September 27, 2007, Judge Gertner GRANTED in part and DENIED in part the Defendants' motion for summary judgment. She also DENIED Alan Brown's motion for summary judgment. Instead, she ordered a Status Conference to take place on December 18, 2007.

On December 18, 2007, that Status Conference took place. The Pre-Trial Conferece was set for April 30, 2008 (coincidentally, the new date for the State Street Annual Meeting). The jury trial is slated to begin on May 5, 2008.

Now, things get really interesting.

Last month, on February 5, 2008, the two sides filed a Joint MOTION to Stay Production of Expert Witness Reports by Alan Brown, State Street Corporation, State Street Global Advisors.

Those must be good.

JOINT MOTION TO STAY PRODUCTION OF EXPERT WITNESS REPORTS

The parties request leave to stay the production of their expert witness reports until April 7, 2007. In support of this request the parties state that they have engaged a mediator, former Judge John Xifaras at JAMS mediation services, and a mediation is scheduled for March 26, 2007, the earliest available date. The parties wish to postpone the costly preparation of their expert witness reports pending their efforts at settlement.

This case is scheduled for trial on May 5, 2007. The parties do not seek to postpone that trial date.

ALAN BROWN,
By his attorneys...

STATE STREET CORPORATION and
STATE STREET GLOBAL ADVISORS
By their attorneys...

What a week Ron Logue faces next week: Jorstad's deadline for filing an appeal, and the Alan Brown settlement nail-biter.

Oh, and as for Logue's judgment about William Hunt being better-suited to run SSgA than Alan Brown?

State Street sets $618 million reserve for legal fight
Company sees $279 mln charge to cover disputes over bond-fund losses

By John Spence, MarketWatch
Last update: 11:18 a.m. EST Jan. 3, 2008

... The firm said William Hunt has resigned as chief executive of State Street Global Advisors, known as SSgA. He'll be replaced on an interim basis by James Phalen, head of international operations for investment servicing and investment research and trading. ...

And as shown here yesterday, clients are citing this top-level turmoil as a reason for severing ties with SSgA and State Street.

In this corner, we have Hillary Clinton and Ron Logue running on dirty tricks, bad lawyering, and "my turn to run things" style experience; while over here in this corner, we have Barack Obama and Alan Brown running on sound judgment, savoir-faire, and competence.

With any luck, Alan Brown dusts of the ol' two-fingered salute, and goes to trial.



P.S. The time for the Directors to toss Logue overboard has long since passed. Or to quote the Solon of State Street "Some people who think they should have been in charge aren't in charge - these things happen."

Will Jorstad File an Appeal?

On March 9, 2007, Patrick Jorstad filed a Complaint in the U.S. District Court for the District of Massachusetts against State Street and a number of its directors and officers. Readers who wish to view the Complaint can do so by logging in to PACER.

Besides PACER, this site, too, will soon provide electronic access to that document, and the others pertaining to the case.

On February 21, 2008, The Honorable Joseph L. Tauro, United States District Judge, GRANTED the Defendants' Motion to Dismiss, without prejudice to refiling.

A party who wishes to appeal a lower court's ruling must file the Notice of Appeal described in Rule 3 of the Federal Rules of Appellate Procedure.

According to Rule 4, such a Notice of Appeal must be filed within 30 days after the judgment or order appealed from is entered on the case's docket. That would mean that any forthcoming Notice of Appeal should be filed by March 22, 2008 - this coming Saturday. But Rule 26 would seem to indicate that Saturdays, Sundays, and legal holidays are excluded from the time period, if the due date for an act falls on one of those days.

Assuming the Court is open on Monday, March 24th, that would seem to be the due date for any forthcoming Notice of Appeal.

This is one case other sttLitigants may wish to follow closely.

sttLitigants

The purpose of this blog branch is simple: to serve as a clearinghouse of information for litigants who are "onto" State Street's Directors, management, lawyers, and auditors.

If you're a pension plan participant, a counterparty, a whistleblower, or anyone else who is considering - or already in - litigation with State Street or one of its shell companies, your insights are welcome here.

Plaintiffs' attorneys are also welcome here, especially if you're currently seeking to recover from State Street for a class of pension plan participants. Please see the Links of Note to the right, and feel free to request that your firm's efforts be added.