New York’s attorney general and the U.S. Attorney’s Office in Manhattan are probing foreign exchange services at State Street Corp. almost five months after suing Bank of New York Mellon Corp over the same issue.
The two offices “have made inquiries to us about our indirect foreign exchange execution methods,” the Boston-based company said today in a filing with the Securities and Exchange Commission. State Street, the third-largest custody bank, has already been sued by California and Arkansas claiming the company overcharged public pension funds for some foreign exchange transactions.
New York Attorney General Eric Schneiderman and the U.S. Attorney’s Office in Manhattan each filed suit in October against BNY Mellon, the world’s largest custody bank, accusing the company of defrauding public pension funds of $2 billion over 10 years. The New York bank also faces suits from Virginia and Florida.
Both banks deny wrongdoing and have said they will fight the suits.
“State Street continues to cooperate with inquiries regarding our indirect foreign exchange services and will vigorously defend the litigation that has been commenced against us,” Carolyn Cichon, a spokeswoman, said today in a telephone interview.
State Street said in today’s filing it expects the plaintiffs may seek to recover all or a portion of the company’s revenue from indirect foreign exchange services, which totaled $331 million in 2011 and was as high as $462 million in 2008.
“We cannot predict the outcome of any pending proceedings or whether a court, in the event of an adverse resolution, would consider our revenue to be the appropriate measure of damages,” the company said in the filing.
All the cases center on the pricing of small transactions handled automatically by the custody banks on behalf of pension funds, a service known as indirect foreign exchange or standing instruction.