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BNY Mellon settles Fla. claim for $28M

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By Thomas Olson
Tuesday, Nov. 5, 2013, 12:01 a.m.
 

The Bank of New York Mellon Corp. agreed to pay $28 million to settle claims by the state of Florida that the bank overcharged a public pension fund for exchanging foreign currencies, but similar lawsuits filed in the last four years are pending elsewhere.

Florida Attorney General Pam Biondi in 2011 sued BNY Mellon, the custodian for the Florida Retirement Systems Trust Fund, alleging that the bank cheated the multibillion-dollar pension plan out of millions of dollars by deliberately mispricing foreign currency exchanges.

The agreement settles those claims, as well as compensating the pension fund for losses it incurred on investments BNY Mellon made on its behalf in Sigma Finance Inc., which later went into receivership.

“We are gratified that the Florida Attorney General is withdrawing her lawsuit” and that the matters are resolved, bank spokesman Kevin Heine said. BNY Mellon admitted no wrongdoing as part of the settlement.

BNY Mellon's foreign exchange and related services accounted for $160 million in revenue in the third quarter, or 5.4 percent of the New York-based bank's $2.94 billion in total revenue.

“It's always nice to put regulatory and litigation items behind you,” said Jeff Harte, an analyst at Sandler O'Neill & Partners, Chicago. “However, there are still a number of outstanding litigation items to resolve.”

A whistleblower lawsuit in 2009 alleged BNY Mellon misreported currency exchange prices to clients in order to inflate bank profits, and the institution was sued by several states, bank customers and shareholders.

The complaints allege BNY Mellon traded currencies for institutional clients at one price, then charged them a different price based on the daily highs and lows. The scheme allegedly involved BNY Mellon's Pittsburgh currency trading desk conspiring with the bank's New York trading desk to set trading prices that benefited the bank financially.

BNY Mellon has maintained it acted properly by notifying clients that they would be charged a price within a published range for each transaction.

Manhattan U.S. Attorney Preet Bharara has a lawsuit pending against the bank claiming that BNY Mellon defrauded clients of more than $1.5 billion over 10 years. In April, a federal judge in New York rejected the bank's motion to dismiss the suit, which was filed in 2011.

New York Attorney General Eric Schneiderman brought a similar lawsuit that same year, which is pending. The state of California filed a similar complaint against the bank in 2011, but some of its claims were dismissed in 2012. A lawsuit that year brought by Virginia's attorney general was dismissed last year.

BNY Mellon stock closed up 15 cents at $32.51 on Monday.

Thomas Olson is a Trib Total Media staff writer. He can be reached at 412-320-7854 or at tolson@tribweb.com.

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