STT State Street Corporation

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)

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