BNY Mellon to pay $714 million to settle foreign exchange cases
Reuters
Published Mar 19, 2015 07:05PM ET
BNY Mellon to pay $714 million to settle foreign exchange cases
By Karen Freifeld and Nate Raymond
(Reuters) - Bank of New York Mellon (NYSE:BK) Corp has agreed to pay $714 million to settle allegations that the bank overcharged pension funds and other clients for foreign exchange services, U.S. federal and state authorities said on Thursday.
Federal and New York state authorities, among others, had accused BNY Mellon of telling clients it would provide the best possible execution for their currency transactions, but instead giving them prices at or near the worst interbank rates during the trading day. Meantime, authorities said, BNY Mellon obtained better spot prices for itself and profited on the spread.
As part of the agreements settling lawsuits filed by New York and the United States, the bank accepted responsibility for the conduct, authorities said.
The world's No. 1 custody bank also agreed to terminate David Nichols, its head of products management, and other executives, Manhattan U.S. Attorney Preet Bharara said. The other executives were not identified.
"The bank repeatedly deceived its customers and is paying a heavy penalty for it," Bharara said in a statement.
BNY Mellon said that it resolved substantially all the foreign exchange-related actions pending as part of the $714 million, including by the U.S. Department of Labor, the U.S. Securities and Exchange Commission and class action litigation.
"We are pleased to put these legacy FX matters behind us," the company said.
BNY Mellon disclosed last month that it would take a $598 million charge as it tried to resolve the cases.
New York Attorney General Eric Schneiderman's lawsuit, which began when a whistleblower filed a complaint in 2009, claimed that BNY Mellon earned $2 billion over ten years through the alleged deception. The U.S. complaint said the bank defrauded clients of hundreds of millions of dollars between 2000 and 2011.
In addition, the bank settled a class action suit partly led by two Ohio pension funds for $335 million pending court approval, said Ohio AG Mike Dewine, adding that the agreement had followed four years of "hard-fought" litigation.
BNY Mellon will pay a penalty of $167.5 million to the United States. New York state will receive a further $167.5 million, nearly all of which will compensate victims of the misconduct, authorities said. The rest of the funds will be split between other agencies involved.
The settlement also resolves Justice Department claims against Nichols, 60, BNY Mellon's products management head.
As part of the agreement, Nichols admitted to knowing the bank did not disclose its pricing methodology to customers, who did not fully understand it, among other things.
Attorney Stephen Fishbein, who represents Nichols, declined to comment.
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The cases include United States v. Bank of New York Mellon, U.S. District Court, Southern District of New York, No. 11-06969, and People of the State of New York v. Bank of New York Mellon, New York State Supreme Court, New York County, No. 114735/2009.
Written By: Reuters
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