State Street to Pay More Than $64 Million to Resolve U.S. Probes -Update
January 18 2017 - 2:45PM
Dow Jones News
By Justin Baer
State Street Corp. said it agreed to pay more than $64 million
to resolve U.S. investigations into whether the company overcharged
certain trading clients in Europe, the Middle East and Africa.
The trust bank said Wednesday that it reached a $32.3 million
settlement with the U.S. Justice Department and the U.S Attorney's
Office in Massachusetts. State Street also said it has offered
another $32.3 million to resolve a separate Securities and Exchange
Commission probe.
The SEC didn't immediately respond to a request for comment.
State Street acknowledged as part of its Justice Department
settlement that it had charged clients secret commissions on trades
related to its work in restructuring their portfolios.
"State Street deeply regrets this matter and accepts
responsibility for the actions of its former employees," the bank
said Wednesday in a statement. "The company fully reimbursed the
six clients that were impacted, terminated responsible employees,
appointed new executives to lead its transition management
business, and implemented new and stronger controls."
The bank had previously set aside $65 million in legal reserves
to cover the costs associated with the potential settlements.
State Street is attempting to remove a legal headache that began
when a client told State Street employees it had identified certain
markups on trades. The bank reported its employees' misconduct to
the U.K.'s Financial Conduct Authority, which concluded State
Street had overcharged clients by $20.2 million in 2010 and
2011.
The FCA fined State Street $37.7 million in 2014. The bank said
at the time it regretted its behavior.
The affected clients included Irish and British government
pension funds and a sovereign-wealth fund based in the Middle
East.
The case triggered investigations by the U.S. authorities. Last
year, federal prosecutors indicted two former State Street
executives, alleging Ross McLellan and Edward Pennings defrauded
those clients. Both pleaded not guilty to the charges, and their
trial is scheduled for October.
"Today's corporate settlement agreement by State Street is not
at all inconsistent with Ross McLellan's innocence of all charges,"
said Martin Weinberg, Mr. McLellan's lawyer. "He looks forward to
presenting his defense to a jury in October. He never acted for
personal profit. He always acted in good faith."
"State Street's decision to negotiate this money settlement has
no bearing on Mr. Pennings's case," said Roger Burlingame, Mr.
Pennings's attorney. "Mr. Pennings has committed no crime, and
voluntarily came to the U.S. to clear his name."
A Dutch citizen, Mr. Pennings lives in the U.K.
Write to Justin Baer at justin.baer@wsj.com
(END) Dow Jones Newswires
January 18, 2017 14:30 ET (19:30 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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