BNY Mellon Foreign-Currency Fraud Case Set for Trial in Virginia
Virginia demanded the trial by jury, which a state judge in Fairfax, Virginia yesterday scheduled to begin Feb. 4. County Circuit Judge Terrence Ney rejected the bank’s argument that the trial last eight to 10 weeks, setting it for six weeks.
The issues “should boil down significantly so that they’ll be understandable to seven laypersons” who will decide the case, Ney said, according to a transcript of yesterday’s hearing.
Virginia Attorney General Kenneth Cuccinelli sued the New York-based bank in August, claiming it violated state law by charging “undisclosed markups” on currency-exchange trades to six retirement funds. Virginia is seeking about $931.6 million in damages.
BNY Mellon, the world’s largest custody bank, has twice sought to have the case dismissed, arguing that it can’t be sued under the Virginia Fraud Against Taxpayers Act because the alleged false or fraudulent claims weren’t submitted to the state for payment.
At yesterday’s hearing, the bank said it would ask Ney to reconsider his earlier decision allowing the case to go to trial.
All the cases center on the pricing of small foreign- exchange transactions handled automatically by the custody banks on behalf of the pension funds, a service known as standing instruction.
The banks say they acted as a principal, selling one currency for another in arms-length transactions at a set price that customers were free to accept or reject.
The states claim the banks were obliged to act as an agent, obtaining the best possible exchange rate in the interbank currency market. Banks misled clients on how they set prices, the states contend.
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