BNY Mellon, State Street Replaced as Ohio Pension Custodians
Bank of New York Mellon Corp. and State Street Corp. (STT) are being replaced as the custodians of international investments for four Ohio pension funds by JPMorgan & Chase Co. (JPM) and Citigroup Inc. (C), state Treasurer Josh Mandel said.
The move comes after BNY Mellon, the world’s largest custody bank, was sued March 12 by Ohio Attorney General Mike DeWine, who claimed the institution swindled pension funds through foreign-currency transactions. Boston-based State Street, the third-biggest custody bank, is being sued by the U.S. Department of Justice and other states over fraud and deceptive-practice allegations, Mandel said in a release.
“I have a duty to end custodial agreements with banks being sued for defrauding taxpayers,” Mandel said in today’s release.
Custody banks earn fees for keeping records, tracking performance and lending securities to institutional investors such as mutual funds, pensions and hedge funds. BNY and State Street managed $41.3 billion in the international portfolios for the Ohio Public Employees Retirement System, Ohio Police & Fire Pension Fund, School Employees Retirement System of Ohio and the State Teachers Retirement System of Ohio, Seth Unger, a Mandel spokesman, said in a telephone interview.
The Police & Fire fund and the school fund seek to recover more than $16 million in losses from BNY Mellon, according to the attorney general.
The bank, which has been sued by several states and the U.S. over pricing practices in foreign-exchange transactions, was accused of “systematically overcharging” the funds, according to a March 12 statement from DeWine.
“We’re disappointed by the treasurer’s actions, because we believe we have provided the state valuable services at competitive prices,” Kevin Heine, a spokesman for BNY, said in a telephone interview. “The suit by the Ohio attorney general recycles baseless allegations, and we are confident we are right on the facts and the law.”
Ohio “remains a valuable client of State Street, and we will not otherwise comment on our relationship with the state,” Alicia Curran Sweeney, a spokeswoman, said in an e-mailed statement.
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