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News & Policy

PBGC Seeks $25 Million from Morgan Stanley on Saint Vincent Pension Losses

June 09, 2011

WASHINGTON—The Pension Benefit Guaranty Corporation, which protects American pensions, is seeking $25 million in damages from Morgan Stanley Investment Management Inc. over risky pension investments it made for New York's Saint Vincent Catholic Medical Centers' pension plan and its participants.

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 that 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 U.S. District Court, but the medical center'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.

PBGC filed its brief May 26 in the U.S. Court of Appeals for the Second Circuit in Manhattan.

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 $25 million in damages from Morgan Stanley on behalf of Saint Vincent's pension plan and its participants.

About PBGC

The PBGC protects the pension benefits of 44 million Americans in 27,500 private-sector pension plans. The agency is directly responsible for paying the benefits of more than 1.5 million people in failed pension plans. PBGC receives no taxpayer dollars and never has. Its operations are financed by insurance premiums and with assets and recoveries from failed plans.

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PBGC No. 11-44