BNY Mellon Faces Forex Suit in New York
By CARRICK MOLLENKAMP And LINGLING WEI
Bank of New York Mellon Corp., facing whistle-blower lawsuits in Virginia and Florida that it improperly charged pension funds for currency transactions, also has been sued in New York, according to New York County court records.
The New York case, filed by a plaintiff called FX Analytics in October 2009, is under seal and the specific allegations aren't public. A spokesman for the New York State Comptroller's office, which oversees the state's $141 billion Common Retirement Fund, declined to comment. A spokesman for New York attorney general said "we can't comment on potential or ongoing matters before our office."
FX Analytics is a Delaware partnership that is being used to hide the identity of the whistle-blowers, according to a person familiar with the situation. A plaintiff by the same name filed whistle-blower claims in Virginia and Florida, also in October 2009, against BNY Mellon on behalf of state and local retirement systems.
The lawsuits are part of a growing number of legal cases being brought against BNY Mellon and State Street Corp. relating to foreign-exchange transactions. A whistle-blower, or qui tam, lawsuit can be brought by an individual or group on behalf of the government, alleging fraudulent activity involving government funds. The government has an option to join the case. Documents are initially filed under seal pending the outcome of the case.
State Street and BNY Mellon, two of the nation's largest custody banks by global assets, have denied the claims and say they will fight the lawsuits. The banks act as custodians for investment firms' securities, handling a number of tasks, including currency trades and back-office work, for institutional investors.
In the suits filed in courts in Fairfax County, Va., and Leon County, Fla., FX Analytics alleges that BNY Mellon profited by pocketing the difference between its cost of currency transactions and the cost it charged to state and local pension funds.
In recent weeks, Virginia's attorney general intervened in the whistle-blower lawsuit against BNY Mellon and Florida's attorney general filed a court document to also intervene in the whistle-blower law suit against BNY Mellon. Both lawsuits allege the custody bank improperly charged for foreign exchange.
An Arkansas public pension fund sued State Street in Massachusetts federal court earlier this month in a similar claim. The cases mirror one brought by the California attorney general in 2009 against State Street.
In Virginia, the attorney general earlier this month issued a request-for-proposal to hire outside counsel to assist in the legal case against BNY Mellon. According to documents reviewed by The Wall Street Journal, the attorney general's office on Feb. 4 issued a request for proposals from law firms to assist Virginia on the case. According to the document, the firm that is hired "will be appointed as special counsel to represent the Commonwealth."
Proposals were due Feb. 15. A spokesman for the attorney general's office said a law firm hasn't yet been hired.
The proposal requests that the firm "have knowledge of the principles of contract, banking, and agency law, and foreign currency exchange in the context of a custodial relationship between a bank and its pension customers."
Write to Carrick Mollenkamp at firstname.lastname@example.org and Lingling Wei at email@example.com