(October 29, 2009) – California Attorney General Jerry Brown is suing State Street on behalf of CalPERS (California Public Employees’ Retirement System) and CalSTRS (California State Teachers’ Retirement System), the state’s two largest pension funds.
The suit contends that the bank cheated the two funds out of at least $56 million, the result of overcharging for foreign exchange trades; the suit is seeking $200 million in remuneration.
“State Street bankers committed unconscionable fraud by misappropriating millions of dollars that rightfully belonged to California’s public pension funds,” Brown told The New York Times. “This is just the latest example of how clever financial traders violate laws and rip off the public trust.” The suit reportedly emerged from an inquiry by state investigators triggered by whistle-blowers claiming that the bank inflated prices secretly. According to The Times, the whistle-blowers claimed this practice cost the bank’s clients upward of $400 million over the past 11 years, and was conducted by using false exchange rates and reporting false prices in account statements, as well as failing to include time-stamp data.
State Street has executed $35 billion in currency trades for the two Californian giants since 2001.
The bank has denied all of the allegations and has indicated that it will fight the suit.
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