"Los Angeles Accuses Northern Trust of Mismanaging Assets"

Edvard Petterson of Bloomberg reports that L.A. City Attorney Carmen Trutanich's office has filed suit against Northern Trust, sponsor of the PGA Tour stop in Los Angeles through 2016, claiming the bank mismanaged assets in the city employees’ pension fund by placing them in “highly risky” sub-prime loans.

“Northern Trust placed its interests in making a profit ahead of the interests of Los Angeles City Employees’ Retirement System in preserving capital because Northern Trust had, from its point of view, nothing to lose and everything to gain by making risky investments,” Trutanich said in the complaint.

Northern Trust, based in Chicago, didn’t tell the city how it invested the collateral until after it reported the losses that the city had to pay, according to the complaint. The losses related to investments in bonds and notes “whose revenue was based upon mortgage-origination, or subprime mortgage loans, or the housing market itself,” according to the complaint.

Northern Trust says the suit has no merit.

Doug Holt, a Northern Trust spokesman, said in an e-mailed statement that the lawsuit had no merit.

“The city attorney’s suit, brought years after the losses were incurred, is based solely on hindsight and is premised on the legally deficient claim that Northern Trust should have predicted these unprecedented events even though the markets as a whole had not,” Holt said.