This just in: Texas pensions will, in fact, mess with felons.
Last May the $26.2 billion Employee Retirement System of Texas responded to Credit Suisse Group AG’s guilty plea for tax fraud by saying that it had “a policy against hiring firms convicted of felonies.”
Last week, five more global banks joined the list of those admitting to criminal behavior, narrowing the choices.
Texas, in a statement, confirmed that it will continue doing business with four of the five, including Citigroup Inc., JPMorgan Chase & Co., Barclays Plc and UBS Group AG. It has also resumed doing business with Credit Suisse.
Together, they account for five of the nine banks the state fund says it uses for foreign exchange. As more banks enter guilty pleas, it makes it increasingly tough for clients to cut them out on principle.
The Texas pension fund resumed business with Credit Suisse “after due diligence was performed and concluded to satisfaction,” Mary Jane Wardlow, a fund spokesman, said in an e-mail.
The fund has procedures to “mitigate exposure to those types of improper dealings in the market” among the firms it uses for trading currencies, Wardlow said. Those practices include keeping dealers from knowing whether they’re buying or selling a security until they execute the trade, she said.
Six of the world’s largest banks agreed to pay $5.8 billion May 20, and five pleaded guilty to charges tied to market-rigging probes. They include Citigroup, JPMorgan, Barclays, Royal Bank of Scotland for colluding in currency markets and UBS’s main banking unit in interest-rate manipulation.
The U.S. Securities and Exchange Commission granted waivers last week that allow the five banks to continue doing business unimpeded, according to a person with direct knowledge of the decision.
“We’re taking the sting out of what it means for a firm to be convicted of a crime,” said Bartlett Naylor, financial policy advocate with Public Citizen, a Washington nonprofit. “The choice of banks is limited on Wall Street because crime has become so pervasive.”