BNY Mellon will pay $19M in Pa. settlements
Bank of New York Mellon will pay $19 million to the state treasury and two public pension systems in a final settlement of losses from a complex investment arrangement that collapsed in 2008.
Under the settlement, BNY Mellon will remain the state's custodian, holding all securities for the state, the State Employees' Retirement System and the Public School Employees' Retirement System. The state treasury previously recovered $22 million in fees from BNY Mellon and $6.4 million from Sigma Finance Inc. of London.
Losses to the three agencies totaled $133.4 million following Sigma's collapse.
The former Mellon Bank and the Treasury Department entered a securities lending contract in 1998, with the state making nearly $404 million from 1999 to 2008, according to Treasurer Rob McCord's office.
In a statement, McCord called the settlement “the best possible deal,” because it avoids a costly lawsuit that could have brought less money.
The settlement was approved by the state attorney general and the boards of the pension systems, he said.
McCord's spokesman, Gary Tuma, said the total recovered, $47.4 million, or 35.5 percent of the loss, compared to a recovery of 28.5 percent in an Oklahoma case involving Sigma, and a median of 3.5 percent nationally in similar lawsuits from 1996 to 2012.
“Obviously, many public and private funds suffered significant and permanent losses when the Great Recession hit,” McCord said.
A new custodial agreement with BNY Mellon can be terminated by the state with a 180-day notice, Tuma said. An amended securities lending agreement “establishes a stronger standard of care, specifically laying out the bank's fiduciary responsibility so that in the future there wouldn't be a debate over what should or shouldn't have happened,” Tuma said.
“We are pleased to reach an agreement with Treasury that resolves our issues and allows us to continue our long-standing relationship with the Commonwealth,” said George Gilmer, head of asset servicing for BNY Mellon.
In July 2012, New York-based BNY Mellon settled a class-action lawsuit for $280 million that CompSource Oklahoma, a state workers' compensation insurance company, initiated after losing money invested with Sigma. BNY Mellon recorded a second-quarter 2012 expense of $210 million to cover that settlement, causing a 37 percent drop in net income.
John D. Oravecz is a staff writer for Trib Total Media.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Dollar Tree buying Family Dollar for $8.5 billion
- Construction of $500M power plant in South Huntingdon stalled
- Groups stand against ‘sub-minimum’ wage for workers with disabilities
- Look out for auto insurance discounts
- Not all pleased about jobs
- Amazon.com distribution center planned for Pittsburgh’s West End
- EPA failing to stop natural gas pipeline leaks, internal watchdog says
- Plug-in Accord makes gas station visits rare
- Federal appeals courts disagree on Obamacare subsidies
- Wesco posts higher profit, lowers full year outlook
- Sell home for best price