State Street Sues Former Execs Over 'Employee Raid'

(July 1, 2010) — State Street Corp. is in the process of suing three of its former executives for conducting a so-called “employee raid” of the bank’s securities lending business while violating confidentiality agreements.

“State Street requires its senior managers adhere to their employment and confidentiality agreements to protect the interests of its clients, investors and employees,” a company spokesperson said to ai5000. “State Street believes that these former employees breached their obligations to State Street, and we intend to protect the Company against this wrongdoing.”

The complaint, filed June 23 in Massachusetts Superior Court in Boston, seeks an injunction and damages from Craig V. Starble, Peter A. Economou, Paul F. Lynch and the company they created, Premier Global Securities Lending. Starble, a former head of securities lending at State Street who left the firm in March 2009, recruited eight of his former colleagues — including Lynch, head of global trading, and Economou, Starble’s replacement — to join PGSL, a third-party securities lending agent that he founded in October 2009, Global Custodian reported.

In a statement from PGSL obtained by Global Custodian, the firm categorically rejects any wrongdoing, noting that the former State Street staff that followed Starble to PGSL were “at-will employees at State Street.” Additionally, none of the employees had a non-compete agreement with State Street, the firm noted.

State Street has not sought any emergency injunctive relief, and PGSL has yet to receive a court order.

Separately, State Street has appointed Nick Bonn to head its securities finance business after his predecessor, Economou, left to join PGSL, led by Starble. Bonn most recently served as global head of sales and client development for State Street Global Markets.

Street also recently appointed Doug Stern and Yvonne Wong to its Enhanced Custody business, the servicing solution for long/short strategies.