Bank of New York Mellon Corp., Virginia settle currency dispute
The Bank of New York Mellon Corp. and Virginia authorities on Friday ended a dispute over accusations that the bank added secret surcharges to foreign currency trades made on behalf of that state's employee pension fund.
Virginia agreed not to pursue a lawsuit against BNY Mellon and, as part of an agreement, will pay $1.1 million to a whistle-blower group that revealed the covert charges. They were disclosed because of work by Grant Wilson, an informant who worked on BNY Mellon's trading desk Downtown. Wilson left BNY Mellon in 2011.
The Virginia Retirement System will pay lower fees for BNY Mellon's securities and foreign exchange services under a new five-year custodial deal that can be renewed for a second five-year term.
“BNY Mellon has been a partner with us for many years, and we look forward to working with them to continue to provide a variety of custody banking services on terms favorable to our members,” said Bob Schultze, director of Virginia's 600,000-member pension system.
A spokeswoman for the pension system declined to discuss details, referring questions to Virginia Attorney General Ken Cuccinelli's office.
The Justice Department in 2011 accused BNY Mellon of netting more than $1.5 billion from overcharging clients for more than a decade.
The allegations said the bank traded foreign currency at one price but charged institutional clients, such as Virginia's pension fund, a different price based on daily price fluctuations.
BNY Mellon has said it did nothing wrong.
“We are very pleased to continue our long-standing relationship with the Virginia Retirement System,” Vince Sands, executive vice president and deputy CEO of BNY Mellon Asset Servicing, said in a statement.
Brian Gottstein, a spokesman for Virginia's attorney general, said the pension fund's board urged Virginia authorities to approve the agreement. He said the state would honor its “contractual obligations” to the whistle-blower group, but he declined to independently confirm the $1.1 million payment, which would be a first in a series of fraud claims filed against BNY Mellon.
A lawyer representing Wilson, the whistle-blower, declined to comment.
A Virginia judge dismissed a lawsuit Virginia filed against BNY Mellon in May, saying it did not fit the legal criteria outlined in the False Claims Act.
Virginia was among several states, including New York, Florida and California, that filed fraud claims related to BNY Mellon's foreign-exchange practices.
“The litigation is over, and BNY Mellon and the funds have extended their respective business relationships for 10 years,” Cuccinelli said. “The case has been resolved by agreement of the parties, which allowed for the reworking and extension of the funds' contracts with the bank. This resolution has conferred significant financial benefits for Virginia employees and retirees.”
Jeremy Boren is a staff writer for Trib Total Media. He can be reached at 412-320-7935 or firstname.lastname@example.org. Staff writer Andrew Contecontributed to this report.