SALEM, Ore. (Legal Newsline) - Oregon Attorney General John Kroger and Treasurer Ted Wheeler announced on Tuesday that the state is seeking to co-lead a class action lawsuit filed in New York federal court against a Bank of New York Mellon Corp.
The banks allegedly caused the loss of at least $15.7 million from the Oregon Public Employees Retirement Fund and the Oregon Common School Fund due to securities fraud engineered by the financial institution. A motion filed in U.S. District Court in New York on Monday seeks to make Oregon a co-lead plaintiff in the existing case.
The losses allegedly came as the result of a foreign currency exchange manipulation scheme that was revealed by whistleblowers who alleged that the bank was rigging prices to get higher profits. BNY Mellon allegedly failed to buy and sell foreign currency at the top execution standards as was promised, charging clients unfavorable rates and pocketing the difference as profit.
"We will not stand for fraud that damages our funds and harms the public trust," Wheeler said.
While Oregon did not have any foreign currency transactions through BNY Mellon, the two Oregon funds were damaged as a result of allegedly fraudulent practices and the subsequent outrage, which caused the state's BNY Mellon holdings to drop in value.
"Holding major financial institutions accountable is a high priority," Kroger said.
The Oregon Investment Council and the state's treasury bought and sold BNY Mellon shares between April 2008 and June 2011 on behalf of the two funds. During that time, the value of the shares fell 41 percent, from $42.06 to $24.86, causing OPERF to lose more than $14.5 million and the CSF to lose approximately $1.2 million.
BNY Mellon allegedly misled investors by failing to describe what had actually occurred within the company, particularly that as much as 69 percent of the profit from foreign exchange trading was allegedly a result of the price manipulation scheme.
Oregon's treasury authorized Kroger's office to pursue the lawsuit. The legal action is separate from those of public funds in other states that traded in foreign currencies and were allegedly also harmed by the price fixing scheme.