BNY Mellon shareholders get heated at annual meeting

| Wednesday, April 11, 2012

Dissident shareholders ripped executives at Bank of New York Mellon Corp.'s most raucous annual meeting in years over allegations that the bank overcharged state pension clients to trade their foreign currencies.

A dozen outspoken shareholders at Tuesday's meeting Downtown also criticized the bank for paying bloated salaries to executives and not paying its fair share of taxes.

A security guard escorted one impassioned shareholder from the meeting, something that spokesman Ron Gruendl said hasn't happened in at least 15 years.

BNY Mellon faces lawsuits filed by whistleblowers and federal and state prosecutors in New York, Florida and Virginia, seeking $2 billion for alleged fraud involving its foreign currency exchange work for institutional clients.

Chairman and CEO Gerald Hassell, who presided over the two-hour meeting, said the bank is "dealing with the litigation" but would not say whether it would attempt to reach settlements. The bank denies the allegations.

"We want every company to make a profit, but at whose expense?" said shareholder LaSaine "Sandy" Latimore of the Hill District. "This will affect the bottom line for all of us who have shares in BNY Mellon."

The lawsuits claim BNY Mellon traded foreign currency for clients at one price and charged them a different price based on daily highs and lows. Court documents accuse BNY Mellon's Pittsburgh currency trading desk of conspiring with the bank's New York trading desk to set trading prices that benefited the bank financially.

The New York lawsuit claims the bank made more than $2 billion on fraudulent transactions over 10 years.

Hassell said BNY Mellon has changed some trading practices, though he did not elaborate. He noted that clients always could choose whether they wanted the bank to execute currency trades.

When a shareholder asked where BNY Mellon would find money to pay penalties if found guilty, Hassell said that would be considered a corporate expense.

He defended independent auditor KPMG against criticism that it should have prevented practices that led to lawsuits.

Robert Krizner, managing partner of KPMG's Pittsburgh office, said such criticism misstates the auditor's role, which is to ensure that a company's financial statements meet accounting standards. He said the firm "stands by" BNY Mellon's 2011 financial report.

One shareholder angered by executive salaries said it would have taken him 240 years to earn the $12 million that BNY Mellon paid Hassell in 2011.

"Is that fair?" the retired steelworker asked Hassell, who had no comment.

Hassell later said such comments are "inevitable" at such forums. He maintained the bank pays its "fair share of taxes" according to law. The bank paid about $25 million in taxes to Pennsylvania last year, including nearly $7.6 million in corporate net income taxes.

"I don't know how you sleep at night making $12 million a year, when some (BNY Mellon) workers are making $10 an hour," said Joni Rabinowitz, a shareholder from Park Place.

Rabinowitz, who retired in 2010 from South Side-based nonprofit Just Harvest, which advocates for the poor, asked Hassell whether he would consider taking a pay cut and using that money to buy bus passes for lower-paid, Pittsburgh-area workers whose commutes could worsen when Allegheny County Port Authority again trims bus service.

"I started at this company 38 years ago and by God's good graces and hard work and determination" rose through the corporate ranks, Hassell shot back. He said he is "sympathetic" to some of the issues raised.

An estimated 150 people attended the meeting. BNY Mellon employed 7,534 people as of its latest count on March 31.

Despite the criticism, shareholders failed to pass proposals to require the bank to split the positions of chairman and CEO into two jobs and to allow holders to vote their shares for an individual director, instead of voting up or down an entire slate. They voted to reappoint KPMG as auditor.

Subscribe today! Click here for our subscription offers.


Show commenting policy