March 22 (Bloomberg) -- Massachusetts, which has accused Bank of New York Mellon Corp. of overcharging its public pension fund on foreign-exchange transactions, moved toward putting the contract out to bid.
The pension fund’s audit committee today recommended that the state seek new bids on the $2.7 million a year contract held by BNY Mellon even though the current agreement doesn’t expire until June 2014. The $50 billion fund’s full board could take up the matter as early as April, Massachusetts Treasurer Stephen Grossman said in a telephone interview.
“It’s been quite a while since we tested the market,” Grossman said. Asked if there was a link between the decision to seek new bids and the state’s dispute with BNY Mellon, Grossman said, “I will let people draw their own conclusions.”
Secretary of the Commonwealth William Galvin in October said the New York-based bank used “a hidden scheme” to maximize profits in foreign-exchange transactions at the cost of pensioners. Grossman said in June that the bank overcharged the state’s public pension system by $30.5 million since 2000.
BNY Mellon has been sued by states including New York and Virginia over the same issue. The bank, the world’s largest custodian, has denied the charges, saying it provided customers with competitive prices on foreign-exchange services.
Kevin Heine, a spokesman for BNY Mellon, didn’t immediately respond to an e-mail seeking comment.
Ohio Treasurer Josh Mandel this week said BNY Mellon and Boston-based State Street Corp. are being replaced as custodians of international investments for four state pension funds.
BNY Mellon was sued March 12 by Ohio Attorney General Mike DeWine for allegedly overcharging on foreign-exchange transactions. State Street, the third-biggest custody bank, is being sued by states including California and Arkansas for its foreign-exchange practices.
Massachusetts last year picked Russell Implementation Services to handle some small foreign-exchange transactions for its pension fund after Russell offered to do the job for a lower price than either BNY Mellon or State Street. Russell is a unit of Seattle-based Russell Investments.
To contact the reporter on this story: Charles Stein in Boston at firstname.lastname@example.org
To contact the editor responsible for this story: Christian Baumgaertel at email@example.com