SEPTA, upset with the performance of its pension fund's investment in Goldman Sachs Group Inc., has sued the financial firm, accusing it of greed.
Goldman Sachs is paying its executives too much and its stockholders too little, SEPTA officials said in a suit filed Tuesday in Delaware.
SEPTA owns about $1 million in Goldman stock, at current values, said SEPTA general counsel Nicholas J. Staffieri.
"The value of that stock dropped because of excessive fees that management took out," Staffieri said yesterday.
Ed Canaday, a spokesman for Goldman, said: "We believe the lawsuit is completely without merit."
SEPTA manages its pension fund for its employees, and the fund has been battered in the recent economic downtown, although it has recovered from its lows early this year.
SEPTA's pension fund, which became a key issue in last year's strike by SEPTA transit workers, had about $640 million at the end of September, down from $719 million in June 2008.
The fund has rebounded since March, when it was down to $471 million. But it remains well short of being "fully funded" - able to meet all potential payments to current and future retirees.
SEPTA officials said the fund was in no danger of missing payments to retired workers or future retirees. But they said it would require increased contributions from SEPTA to remain sound.
In the suit against Goldman, SEPTA said the bank was not acting in shareholders' best interests when it approved executive pay and bonuses amounting to almost half the bank's net revenue.
"No reasonable director would approve, year in and year out, of awarding management almost 50 percent of net revenues as compensation," SEPTA officials said in the Delaware Chancery Court suit. Traditionally, Wall Street banks have set aside about 50 percent of revenue to pay workers. Goldman, Morgan Stanley, and JPMorgan Chase & Co.'s investment bank may hand out as much as $27.6 billion in bonuses this year, analysts estimate, 49 percent higher than a year ago and more than the 2007 high of $26.8 billion.
"Goldman's employees are unreasonably overpaid for the management functions that they undertake, and shareholders are vastly underpaid for the risks taken with their equity," SEPTA said in the suit.
SEPTA is seeking, for itself and other Goldman stockholders, an unspecified amount for what it says is the lost value of stock holdings.
Staffieri said SEPTA would not have to pay any legal fees unless it wins its suit.
Goldman shares closed at $167.79 a share yesterday, up 93 cents. They reached $236 in October 2007, and fell as low as $53 in November 2008.