RI Governance & Engagement, August 18: ABP hits snag in Countrywide legal action

RI’s regular review of governance and engagement news

ABP, the €242bn Dutch civil service pension fund, has had a reversal in its fraud claims against Bank of America relating to its Countrywide subsidiary’s mortgage-backed securities operations in the run-up to the financial crisis, according to a Reuters report. Judge Mariana Pfaelzer in Los Angeles federal court ruled earlier this month that the fund waited too long to file state and federal fraud claims. ABP filed its complaint on February 14 this year.

Insurance giant Aviva has informed Amnesty International that it has reviewed its position on directly investing in companies which produce cluster bombs, saying it is “no longer involved in such funding”. The Independent reported Aviva has a “stop list” of 12 arms makers including US defence firms Lockheed Martin, Textron and Alliant Techsystems.

The Canadian Securities Administrators have made amendments to executive pay rules, which will “provide investors with enhanced information on the key risks, governance matters and compensation practices of publicly listed companies”. From October 31 firms will be required to disclose whether their boards adequately considered the implications of the risks associated with pay policies and practices. Announcement

The London Borough of Havering is seeking an investment advisor to help it with, among other things, corporate governance and socially responsible investment policies. The up to £560,000 (€642,624) contract is for five years with an option to extend for a further two years; the deadline for responses is September 19. Link to tender document

A study by Zurich-based research firm Obermatt has found that large listed companies are not very good at linking pay and performance, according to a report in the Financial Times. The report added the research found a significant gap between total pay and what CEOs deserved. Obermatt specialises in indexing operating performance and current rates 539 companies.

The Public Company Accounting Oversight Board, the US nonprofit corporation which oversees auditing to protect investors, is seeking comment on how auditors’ independence, objectivity and “professional scepticism” could be improved. It is seeking feedback on the idea of auditor rotation ahead of a public roundtable meeting in March next year. The deadline for comments is December 14.The $129bn (€89.8bn) Florida Retirement System Trust Fund was overcharged by millions of dollars for foreign exchange transactions by custodian BNY Mellon, according to a complaint by the State of Florida. The $54.3bn Virginia Retirement System is also taking legal action against the bank, which has called the cases “unwarranted”. Florida Attorney General Pam Bondi said: “Overcharging for foreign exchange transactions is essentially stealing, and any company that does so will be held accountable.”

Separately, the Knights of Columbus, the $17bn charitable organisation, has sued BNY Mellon over mortgage-backed securities losses. The investor claims the bank violated terms of agreements on 18 residential mortgage-backed securities issued by Bank of America Corp.‘s Countrywide arm, according to the Wall Street Journal.

Wachovia, the US bank bought by Wells Fargo at the height of the financial crisis, will pay investors $590m, with its auditors KPMG paying an additional an additional $37 million, in one of the 15 biggest class action settlements in history. The Orange County Employees’ Retirement System, the Louisiana Sheriffs’ Pension and Relief Fund, and the Southeastern Pennsylvania Transportation Authority, were lead plaintiffs in the case. Wachovia was found to have misrepresented and/or omitted to disclose material facts concerning the nature and quality of its multi-billion dollar option-ARM (adjustable rate mortgage) “Pick-A-Pay” mortgage loan portfolio.

Activist investor Cevian – which recently hired former UK Financial Services Secretary Lord Myners – has raised its stake in Finnish IT firm Tieto to 10.2%, according to reports. Cevian is now the second largest investor in the company after Finnish state investor Solidium.
Chipmaker Intel and US energy firm Chesapeake Energy have been added to the MSCI ACWI Islamic Index. In all, 39 firms will be added and 23 deleted from the index in a review. The changes come into force at the end of the month. Announcement

The Dubai-based Hawkamah Institute for Corporate Governance, its sister institute Mudara Institute of Directors and the Kuala Lumpur-based ICLIF Leadership and Governance Centre have teamed up to provide a training for regional bank boards to help them “fulfill their fiduciary duties as directors”. Link