State Street boosts legal reserves
Jerry Brown (D)
BOSTON (Legal Newsline)-An institutional bank California Attorney General Jerry Brown is suing announced Friday it was boosting its legal reserves significantly.
Boston-based State Street Bank and Trust said it added $250 million to a legal reserve it created in 2007 "for certain active fixed income strategies," a spokeswoman said.
The bank said it also revised its third quarter earnings to reflect the move. Arlene Roberts, vice president of public relations
for State Street Corp., said the move is unrelated to Brown's lawsuit.
The bank, which services large clients such as retirement funds and insurers, is accused of defrauding two California pension funds: CalPERS and CalSTRS, which are two of the nation's largest pension funds.
Brown filed a $200 million lawsuit against the bank in late October, claiming it overcharged the funds for executing foreign currency trades since 2001. Brown's office estimates that the Boston-based bank overcharged the pension funds by more than $56.6 million over eight years.
"Over a period of eight years, State Street bankers committed unconscionable fraud by misappropriating millions of dollars that rightfully belonged to California's public pension funds," Brown said, announcing the lawsuit. "This is just the latest example of how clever financial traders violate laws and rip off the public trust."
The lawsuit asks for damages, civil penalties of $10,000 for each false claim, and recovery of costs, attorneys' fees and expenses.
California Public Employees' Retirement System had about $173 billion in assets as of Jan. 31. The California State Teachers Retirement System had $114 billion in assets.
For its part, State Street Corp. has denied any wrongdoing.
The Wall Street Journal reported Friday that the California Public Employees' Retirement System knew as early as 2003 that it was paying high rates on foreign exchange trades.
"We were hired in the third quarter of 2003 by CalPERS to write a report on FX pricing from their custodians," Neil Record, chief executive of Record Currency Management, was quoted by the newspaper as saying. "We found uncompetitive pricing."
From Legal Newsline: Reach staff reporter Chris Rizo at firstname.lastname@example.org.