--BNY Mellon, Virginia reach deal on currency-pricing
litigation
--Lawsuit to be permanently dismissed
--Whistleblower payment is first in large field of lawsuits
(Adds details of payment to whistleblower in case)
By Christian Berthelsen
Bank of New York Mellon Corp. (BK) has reached a settlement over
accusations it charged hidden mark-ups on currency transactions to
Virginia's employee pension fund, in a deal that will include a
$1.1 million payment to the bank insider who brought the practice
to light, according to a source familiar with the matter.
As part of the agreement, Virginia will permanently drop its
lawsuit against Bank of New York, and the bank will offer some
compromises on fees going forward, according to sources familiar
with the details who spoke on condition of anonymity. A proposed
order either already has or is about to be filed with the court
seeking permanent dismissal of the case, one of the sources
said.
The payment to the whistleblower is the first of its kind in a
series of suits that mushroomed after institutional clients of the
bank learned of the accusations. Pension funds in Virginia and
several other states and municipalities have accused Bank of New
York and fellow custodial bank State Street Corp. (STT) of
deceiving them by using a least-favorable high or low range to
price their currency trades, and pocketing the difference.
Virginia's suit was dismissed in May, after a judge found it
couldn't properly pursue the case against the bank using the False
Claims Act clauses it was filed under. Since then, the state has
said it is weighing its options about how and whether to
refile.
The U.S. Justice Department has alleged Bank of New York
overcharged clients for currency trades for at least a decade,
receiving more than $1.5 billion from the tactic during one
four-year period. The bank has denied wrongdoing.
BNY Mellon announced Thursday it has struck a five-year custody
deal with the Virginia retirement system. Under the agreement with
Virginia, BNY Mellon said it will continue to provide custody,
securities and foreign-exchange services to the Virginia Retirement
System under the terms of the contract, which also contains an
option for another five-year renewal.
The Justice Department's lawsuit said Bank of New York has taken
steps to appease angry clients outside the court system, including
by agreeing to repay to investment funds managed by Prudential
Financial Inc. (PRU) about half the $28 million it was alleged to
have improperly earned from the insurer's trades over five years.
The source familiar with the new Virginia deal said repayment for
past trades wasn't part of the arrangement.
Write to Christian Berthelsen at
christian.berthelsen@dowjones.com
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