February 4, 2013
Dear Potential Provider:
The Massachusetts Pension Reserves Investment Management (PRIM) Board is requesting proposals from law firms interested in providing Legal Counsel Services for Litigation Related to Foreign Exchange Currency Trading as set forth in Section III of this Request for Proposals (“RFP”).
In order for responses to be considered by PRIM, each prospective provider must respond to the RFP by submitting an electronic copy of its response via e-mail received by 3:00 p.m., EST, Monday, March 11, 2013 to .
In addition, one hard copy of the response should be sent and received by 3:00 p.m. EST, Monday, March 11, 2013 to the attention of:
Samantha Wong
Procurement Officer
Pension Reserves Investment Management Board
84 State Street, Suite 250
Boston, Massachusetts 02109
Copies of this RFP can be obtained electronically from the PRIM website at www.mapension.com.
Further instructions for response submission are included in the RFP. Questions concerning the RFP must be submitted by email to received by 3:00 p.m., EST, Tuesday, February 19, 2013.
We appreciate the time and effort required to respond to this RFP. Each Respondent submitting to PRIM can be assured that the same time and effort will be expended in evaluating the responses that are submitted for consideration. We look forward to your response.
Sincerely,
Michael G. Trotsky, CFA
Executive Director
Chief Investment Officer
REQUEST FOR PROPOSALS (RFP)
LEGAL COUNSEL SERVICES FOR LITIGATION RELATED TO
FOREIGN EXCHANGE CURRENCY TRADING
I. INTRODUCTION/PURPOSE.
The Massachusetts Pension Reserves Investment Management Board (PRIM) is soliciting responses from law firms interested in providing Legal Counsel Services for Litigation Related to Foreign Exchange Currency Trading. A more detailed description is set forth in Section III below under the heading "SCOPE OF SERVICES". PRIM intends to select counsel based on PRIM’s evaluation of the responses in accordance with this RFP, and in particular the Selection Criteria contained in Section VIII and Fee Proposals submitted pursuant to Section IX.
II. BACKGROUND INFORMATION.
A. Legal Structure of PRIM.
The PRIM Board was created in 1983 by the Commonwealth of Massachusetts through legislation (Chapter661 of the Acts of 1983, as amended by Chapter315 of the Acts of 1996) to provide general supervision of the investments and management of the Pension Reserves Investment Trust (PRIT) Fund. The PRIT Fund was created by the same legislation and is the investment portfolio for the assets of the State Employees’ and State Teachers’ Retirement Systems, as well as local retirement systems that choose to invest in the PRIT Fund.
PRIM is governed by a ninemember board of trustees. The trustees include: (1)the Governor, ex officio, or his designee; (2)the State Treasurer, ex officio, or his designee, who shall serve as Chair of the PRIM Board; (3)a private citizen, experienced in the field of financial management, appointed by the State Treasurer; (4)an employee or retiree, who is a member of the State Teachers’ Retirement System, elected by the members of such system, for a term of threeyears; (5)an employee or retiree, who is a member of the State Employees’ Retirement System, elected by the members of such system for a term of threeyears; (6)the elected member of the State Retirement Board; (7)one of the elected members of the Teachers’ Retirement Board chosen by the members of the Teachers’ Retirement Board; (8)a person, who is not an employee or official of the Commonwealth, appointed by the Governor; and (9)a representative of a public safety union, appointed by the Governor. Appointed members serve for a term of fouryears.
The mission of the PRIT Fund is to ensure that current and future pension benefit obligations are adequately funded in a costeffective manner. PRIM therefore seeks to maximize the total return on investments within acceptable levels of risk for a public pension fund. Under current law (as amended by Section45 of Chapter68 of the Acts of 2011), by the year 2040, the PRIT Fund will have grown, through annual payments in accordance with a legislatively approved funding schedule and through total investment return of the PRIT Fund, to an amount sufficient to meet the thenexisting pension obligations of the Commonwealth. The Commonwealth has adopted a schedule of state pension appropriations that assumes a longterm actuarial rate of return for the PRIT Fund of 8.25%.
The ninemember board of trustees, as trustee for each retirement system that invests in the PRIT Fund, has the authority to employ an Executive Director, outside investment managers, custodians, legal counsel, consultants and others as it deems necessary; to formulate policies and procedures; and to take such other actions as necessary and appropriate to manage the assets of the PRIT Fund.
The PRIM Board is the legal custodian of the PRIT Fund and has fiduciary responsibility for the assets transferred to the PRIT Fund by state and local retirement systems. PRIM selects the PRIT Fund’s investment managers and advisors, reviews and evaluates total PRIT Fund and individual investment manager performance, and performs various other activities in the daily management of the PRIT Fund. As of January 31, 2013, the PRIT Fund had net assets totaling approximately $53 billion.
PRIM is governed by Massachusetts General Laws, Chapter 32 and oversees the Fund under the terms of its Operating Trust Agreement (available at www.mapension.com) dated July 15, 1988 and amended on September 22, 1998. The members of the Board, in conjunction with the Executive Director, who serves at the pleasure of the Board, determine policies and make decisions concerning the administrative and investment operations of the Fund.
PRIM has established advisory committees (Investment, Administration & Audit, Real Estate & Timber, and Compensation) to provide a broad range of input to the Board. These committees are generally comprised of several Board members and also private citizens with investment and/or business expertise. All significant policies and investments are ultimately approved by the Board. PRIM's legal services providers primarily communicate with PRIM’s General Counsel.
B. General Description of PRIM’s Assets, Investment Managers, Advisers, Auditors, and Custodian.
Exhibit A contains a description of PRIM’s long-term target asset allocation. Exhibit B is a list of PRIM’s investment managers. Exhibit C is a list of PRIM’s advisers. KPMG is PRIM’s, Real Estate, Timber and Hedge Fund of Funds auditor. Deloitte provides general tax services. BNY Mellon (BNYM) is PRIM’s custodian.
III. SCOPE OF SERVICES.
Legal Counsel Services for Litigation Related to Foreign Exchange Currency Trading.
The purpose of this RFP is to evaluate, select and engage legal counsel for the litigation, on behalf of PRIM and the PRIT Fund, of claims arising from foreign exchange services provided to PRIM by its custodian, Bank of New York Mellon Corporation (“BNYM”). Some of the core basic factual and legal issues relating to the litigation services that are the subject of this RFP are set forth and alleged in publicly available filings in the following two legal actions:
· In the Matter of The Bank of New York Mellon Corp., Docket No. 2011-0044 (Office of the Secretary of the Commonwealth of Massachusetts, Securities Division) (A copy of the Complaint is available online at http://www.sec.state.ma.us/sct/archived/sctmellon/melloncomplaint.pdf). PRIM directs respondents’ attention to paragraph 25 of this Complaint which sets forth relevant language from the Custody Agreement between PRIM and BNYM.
· Commonwealth of Mass., ex rel. FX Analytics v. The Bank of New York Mellon Corp., Civil Action No. 2012-01955 (Suffolk. Super. Ct., MA.) (unsealed qui tam complaint; copy available online at http://www.tenlaw.com/tenlaw/docs/complaint.pdf).
PRIM has disclosed to BNYM that it is considering bringing claims against BNYM relating to BNYM’s foreign exchange services. PRIM and BNYM have agreed that the running of any statute of limitations applicable to any such action or proceeding is tolled and suspended for the period beginning on July 30, 2012 through July 29, 2013. An evaluation of the merits of the potential action has been conducted and has concluded that PRIM has meritorious claims against BNYM. PRIM will share this litigation evaluation analysis with finalist respondents, under attorney-client privilege, after an initial evaluation of the Responses to this RFP is completed.
Publicly available reports estimate the overcharges to PRIM associated with BNYM’s foreign currency exchange practices to be approximately $29 million over the course of approximately the past decade.
Additionally, similar factual and legal issues related to BNYM’s provision of foreign exchange services to other of its custodial clients can be found in filings related to the following legal actions:
· In Re Bank of New York Mellon Corp. Foreign Exch. Transactions Litig., 12-md-02335-LAK (S.D.N.Y.) and the actions consolidated therein
· United States of America v. The Bank of New York Mellon Corp., No. 11-cv-06969-LAK (S.D.N.Y.) (A copy of the Complaint is available online at http://graphics8.nytimes.com/packages/pdf/business/20111005-bank/BNYM-Complaint2.pdf). On or about June 6, 2012, the United States Attorney filed a Second Amended Complaint, a copy of which is available through the United States District Court for the Southern District of New York’s ECF system.
· State of New York, ex rel. FX Analytics v. Bank of New York Mellon Corp., Index No. 09/114735 (N.Y. Sup. Ct., N.Y. County) (A copy of the Complaint is available online at http://www.ag.ny.gov/sites/default/files/press-releases/2011/2011-10-04-complaint.pdf).
· State of Florida ex rel. FX Analytics v. The Bank of New York Mellon Corp., Case No. 2009 CA 4140 (Second Jud. Cir. Leon County, Fl.) (A copy of the Complaint is available online at http://myfloridalegal.com/webfiles.nsf/WF/JDAS-8KMRNR/$file/BNYMellonComplaintinIntervention8-11-11.pdf).
· Commonwealth of Virginia ex rel. FX Analytics v. The Bank of New York Mellon Corp., Case No. CL-2009-15377 (Fairfax County Cir. Ct., Va.) (A copy of the Complaint is available online at http://www.fairfaxcounty.gov/courts/cases/cw-v-bank-of-ny-mellon/pdfs/complaint-in-intervention.pdf. In or about November 2012, Virginia and BNYM settled this action. The settlement is reported in the following Wall Street Journal article: http://online.wsj.com/article/BT-CO-20121108-723724.html.
Similar factual issues and claims have been alleged against State Street Corporation, which has no relationship with PRIM. These claims may nonetheless be of interest to respondents and can be found in the following legal actions:
· Arkansas Teacher Retirement System v. State Street Corporation, No. 11-CV-10230 (MLW) (U.S.D. Ct. D. Mass.)
· State of California v. State Street Corp., Case No. 34-2008-00008457-CU-MC-GDS (Cal. Superior Ct., Sacramento Co.) (A copy of the Complaint is available online at http://graphics8.nytimes.com/packages/pdf/business/21StateStreetInitialComplaint.pdf).
IV. RESPONSE SPECIFICATIONS.
A. Response Deadline.
The completed response, including all attachments, must be received electronically via e-mail received at by 3:00 p.m. EST on Monday, March 11, 2013 (the “Response Deadline”). Any Response received after the Response Deadline will not be considered.
All electronic documents submitted must be 10MB or smaller in size. If necessary, the respondant should separate the RFP submission into multiple emails to ensure that the 10 MB size requirement is met. The respondant is responsible for ensuring that a complete electronic RFP response is received prior to the Response Deadline.
In addition, one hard copy of the response should be sent and received by 3:00 p.m., EST, Monday, March 11, 2013 to:
Samantha Wong
Procurement Officer
Pension Reserves Investment Management Board
84 State Street, Suite 250
Boston, Massachusetts 02109
Copies of this RFP can be obtained electronically from the PRIM website at www.mapension.com.
B. Cover Letter and Required Attachments/Enclosures.
RFP responses must include the following information:
The Response must be accompanied by a cover letter signed by at least one individual who is authorized to bind the Respondent contractually. This cover letter must include:
a. An executive summary of the Response;
b. The Respondent’s name, address, telephone number and email address;
c. The name of the person proposed to be the primary PRIM client contact of the Respondent;
d. The title or position which the signer of the cover letter holds; and
e. A statement to the effect that the Response is a firm and irrevocable offer of the Respondent.
The cover letter must contain the following attachments/enclosures:
a) Qualifications and Experience. All responses must include a statement that the Respondent meets the minimum qualifications required by Section VI below and should set forth any additional experience and expertise as described in Section VII below. The response should also provide a description and history of the Respondent.
b) Resumes of Individuals. All responses must include a resume for each individual who will be providing services as well as written descriptions of such individuals’ experience in the categories of services and/or related duties identified and sought by this RFP. All Respondents must identify the individual(s) who will have primary responsibility for contact and communications with PRIM. PRIM reserves the right to reject, in PRIM’s sole discretion, a Respondent’s use of any particular individual to perform services. Any changes to personnel identified in the response will require approval by PRIM, and PRIM reserves the right to terminate a contract if such changes are not approved.
c) Conflicts of Interest. Responses must describe any existing or potential conflict of interest, including issue conflicts and joint representation conflicts associated with the claims identified in Section III, that will or could arise and that should be considered, and provide sufficient facts, legal implications, and possible effects so that the significance of each potential conflict can be evaluated and appreciated.
d) Malpractice and Discipline. Respondents must provide the dollar limits of malpractice and/or errors/omissions coverage and state whether the Respondent has settled any past claims or has any claims pending against it currently related to similar services. Please indicate whether the Respondent or any attorneys identified in the response have been named as a defendant in any malpractice or disciplinary actions and if so, briefly describe any such action and the outcome of such action.
e) References. All responses must identify at least three (3) client references, and preferably clients who have utilized the Respondent on matters related to the services called for by this RFP. The references must include a contact person, a full address, an email address, and phone number. PRIM will presume that the persons identified in the response provided services to the client references listed, unless the response indicates otherwise.