State Street Plans $279 Million Writedown To Guard Against Subprime Lawsuits

Boston–Facing potential legal action from unhappy customers, State Street Corporation will create a $618 million reserve, The Boston Globe reported Thursday.State Street will take a $279 million charge to cover any subprime-related legal costs resulting from customers who feel its Global Advisors section may not have handled underperforming fixed-income investments as they wished.Some investment strategies were affected by subprime mortgage market exposure and liquidity issues and that it will “vigorously” defend itself against the claims, according to the Globe.Fiscal 2007 earnings per share will be between $3.42 and $3.45, based on a revenue increase of more than 30 percent from 2006, State Street said.State Street also announced Thursday that it had appointed a new investment division CEO, James Phalen, who currently is an executive vice president and head of international operations for investment servicing and investment research. Phalen will replace William Hunt, who resigned, temporarily until a new CEO can be found.