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<span class="articleLocation”>State Street Corp will pay $64.6 million
to resolve U.S. investigations into what prosecutors said was a
scheme to defraud six clients through secret commissions on
billions of dollars of trades, authorities said on Wednesday.
Under the deal, State Street entered into a deferred
prosecution agreement with federal prosecutors in Boston and
agreed to pay $32.3 million. The bank has agreed to pay an equal
amount to the U.S. Securities and Exchange Commission.
As part of the deal, State Street admitted to conspiring to
add secret commissions on trades performed for the six clients,
prosecutors said. It also agreed to enhance its compliance
program and retain a corporate monitor.
“Banks that defraud their clients in this way must be held
accountable, no matter how big they are,” acting U.S. Attorney
William Weinreb in Boston said in a statement.
The settlement came after prosecutors in April announced the
indictment of two ex-Street Street executives, Ross McLellan, a
former executive vice president, and Edward Pennings, a former
senior managing director in the bank’s London office.
The case followed a 2014 settlement between State Street and
the UK Financial Conduct Authority in which the Boston-based
bank paid a fine of £22.9 million (about $37.8 million) for
charging the six clients mark-ups on certain transactions.
State Street said in a statement that it cooperated in the
investigations, had reimbursed the six clients at issue, had
fired employees in connection with the matter and had
implemented stronger controls.
“State Street deeply regrets this matter and accepts
responsibility for the actions of its former employees,” it
State Street has faced other allegations of overcharging. In
July, it announced it would pay $530 million to resolve U.S.
probes and lawsuits involving claims that it overcharged clients
on foreign-currency transactions.
Prosecutors said that from 2010 to 2011, McLellan, Pennings
and others conspired to add secret commissions to fixed income
and equity trades performed for the six clients.
Prosecutors said the clients were using a State Street unit
that helps institutional customers move their investments
between asset managers or liquidate large investment portfolios.
The commissions, which McLellan and Pennings took steps to
hide, came on top of fees the clients agreed to pay despite
written instructions to the bank’s traders that they should not
have to do so, prosecutors said.
Both have pleaded not guilty to securities fraud and wire
fraud charges. Their trial is scheduled for October.
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