By Aruna Viswanatha
WASHINGTON-- Bank of New York Mellon Corp. will pay $714 million
to resolve allegations it defrauded pension funds and other clients
by overcharging them on currency transactions, capping long-running
federal and state lawsuits over the issue.
The settlements, announced Thursday, resolve cases from
Manhattan U.S. Attorney Preet Bharara and New York Attorney General
Eric Schneiderman that accused the custody bank of giving some
clients worse prices on foreign currency trades than they had been
promised.
It also ends related private cases and investigations by the
Securities and Exchange Commission and the U.S. Department of
Labor, according to Mr. Schneiderman's office.
Under the deal with New York, the bank agreed to fire "certain
employees involved in the conduct," including David Nichols, a
managing director and head of products management who was also
charged in the federal lawsuit.
The bank admitted it told certain clients its focus was on
"securing the best possible rates for our clients," even though it
gave those clients prices that were at or near the worst interbank
rates reported during the trading day or session, according to
settlement documents.
"We are pleased to put these legacy FX matters behind us, which
is in the best interest of our company and our constituents," the
bank said in a statement.
The bank had strongly denied the allegations since the lawsuits
were filed in 2011, agreeing in 2012 only to make changes to
pricing disclosures. Last month it said it would adjust its
fourth-quarter results to include a $598 million litigation expense
as it neared resolution of foreign-exchange and other matters.
The cases revolved around the bank's foreign exchange "standing
instruction" program, under which pension funds and other clients
allow the bank unilaterally to handle their foreign-exchange
transactions.
As a custody bank, BNY Mellon safeguards about $28.5 trillion in
assets for money managers, companies and other clients, performing
administrative functions on behalf of other banks and corporations.
It is also an investment manager, with $1.7 trillion of assets
under management.
The $714 million settlement will be parceled out to various
parties, including $335 million split between the U.S. Justice
Department and New York State. Mr. Schneiderman's office said its
portion would largely go to compensating customers of the bank who
were victims of the pricing strategy, including two state
agencies--the New York State Deferred Compensation Plan and the
State University of New York.
Write to Aruna Viswanatha at aruna.viswanatha@wsj.com
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