BNY Mellon Unit Sued by Film Executive’s Charity Over Losses

Bloomberg -- A British charity sued a Bank of New York Mellon Corp. unit that managed its funds, saying risky investments caused losses of about 7.9 million pounds ($12.2 million).

BNY Mellon’s Insight Investment Management Ltd. oversaw holdings “wholly unsuitable for the foundation,” including funds linked to derivatives and catastrophe bonds, according to a lawsuit filed by the Rank Foundation, a charity founded by the late film executive J. Arthur Rank.

Rank’s 48 million-pound portfolio was liquidated in 2009 after falling more than a quarter in 12 months, the charity said in the lawsuit, filed at a London court in July and made public this week.

The case is the latest legal dispute for BNY Mellon, the world’s largest custody bank. The New York-based lender faces lawsuits from the New York attorney general over claims it defrauded clients in foreign-exchange transactions, Chesapeake Energy Corp. over disputed bonds, and a U.S. tax court case dealing with foreign tax credits.

Along with catastrophe bonds, which are linked to insurance payouts, Insight invested in unrated and B-rated bonds, according to the charity’s claim. Insight “failed to identify that there was a disproportionately high level of high risk investments in the Rank Portfolio,” it said.

Insight has “a long history” of advising clients including pension funds and non-profits, Rhiannedd Brooke, a spokeswoman for Insight, said in an e-mailed statement.

PINEWOOD STUDIOS

“We take our fiduciary responsibilities seriously,” Brooke said. “We are disappointed that this claim has been brought, we reject the assertion that Insight invested funds inappropriately and therefore reject the claim.”

The charity was set up by Rank, a British film executive who died in 1972, to fund projects for disadvantaged young people and vulnerable retirees while promoting Christian values. Rank was one of the founders of Pinewood Studios, where sections of the 2012 James Bond movie Skyfall were filmed.

David Sanderson, chief executive officer of Rank, declined to immediately comment when reached by phone. BNY bought London- based Insight from Lloyds Banking Group Plc for 235 million pounds in August 2009.

The case is: The Rank Foundation Ltd. v Insight Investment Management Ltd., case no. 13-971, High Court of Justice, Chancery Division.