US - The Pension Benefit Guaranty Corporation is seeking $25m in damages from Morgan Stanley Investment Management over risky pension investments it made for New York's Saint Vincent Catholic Medical Centres' pension plan.
In 2007 and 2008, Morgan Stanley invested the assets of Saint Vincent's pension plan in mortgage-backed securities.
The PBGC, which is now responsible for paying benefits to Saint Vincent's 9,500 workers and retirees, believes Morgan Stanley knew those financial instruments were too risky, and that investing in them violated the plan's guidelines.
Saint Vincent raised the issue last year in a US District Court, but the medical centre's lawsuit was dismissed.
PBGC's appeal argues that the district court got it wrong by misreading the complaint and overlooking key facts about the high concentration of investments in mortgage-backed securities in 2007 and 2008, even while the firm was aware those investments were risky and contrary to Saint Vincent's instructions.
"The agency wants the Second Circuit to overturn the ruling and require the district court to hear the case on its merits. If that happens, the agency will seek $25m in damages from Morgan Stanley on behalf of Saint Vincent's pension plan and its participants," PBGC said in a statement.
The brief, which PBGC filed on May 26 in the US Court of Appeals for the Second Circuit in Manhattan, can be read here.
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