2 ex-State Street executive cleared of charges

AP News
Posted: Oct 31, 2011 4:24 PM
2 ex-State Street executive cleared of charges

Two former executives of State Street Bank & Trust Co. have been cleared of federal civil fraud charges of misleading investors about their potential risk from subprime mortgage investments in 2007.

The chief administrative law judge at the Securities and Exchange Commission issued an order Friday dismissing the charges filed last year against John Flannery and James Hopkins.

Judge Brenda Murray said neither Flannery nor Hopkins was responsible for the misleading documents alleged to have been provided to investors in the bond fund marketed by State Street Global Advisors.

Flannery was the chief investment officer of State Street Global Advisers; Hopkins was the head of product engineering.

Boston-based State Street agreed to repay investors about $300 million in February 2010 to settle charges by the SEC and Massachusetts regulators related to the bond fund. State Street also has paid around $340 million to investors to settle private lawsuits.

The SEC said the fund was marketed as an alternative to a money market fund. But it was almost entirely invested in securities tied to risky subprime mortgages, the agency said. The value of those securities plunged when the housing bubble burst in mid-2007.

Attorneys for Flannery and Hopkins issued statements Monday saying they were pleased with the judge's decision in a case they asserted should never have been brought.