Bank of New York Mellon got slammed with two lawsuits yesterday for allegedly taking over $2 billion in illicit profits from its New York pension fund clients over the last decade.
The two separate lawsuits were filed within hours of each other by New York Attorney General Eric Schneiderman in state supreme court and U.S. Attorney Preet Bharara in a federal district court in Manhattan.
Both suits allege that BNY Mellon defrauded its clients by overcharging on foreign currency trades.
You can see some good background here at the WSJ from mid-September.
BNY Mellon has denied any wrongdoing on their part, and issued a press release yesterday following Schneiderman’s filing denouncing the state attorney general’s lawsuit as “flat out wrong, both on the law and on the facts.”
This isn’t the first time BNY Mellon has been hit with legal troubles, and issues with their foreign currency transaction rates have been brewing in other states. The South Carolina state treasurer sued the company in January. Two months later, another suit from the Southeastern Pennsylvania Transportation Authority followed.
In August, state attorney generals in Virginia and Florida also sued the company. All the lawsuits involved the improper foreign exchange rates provided by BNY Mellon and its effects on investment and pension funds.
The company has also faced increased scrutiny from officials in California and Massachusetts on their forex charges.
The Wall Street Journal points out that Schneiderman will have a powerful weapon at his disposal in New York – the state’s 1921 Martin Act. New York attorney general has a breadth of power in fighting financial fraud under the law, and those called in to questioning under the Martin Act do not have a right to legal counsel or a right against self-incrimination.
According to the WSJ:
The Martin Act gives New York’s attorney general a broad swath. It allows New York to lead a legal action on behalf of funds in New York and across the country. Tuesday’s lawsuit includes an exhibit of more 130 public and private entities—ranging from a YMCA in Los Angeles to the state of New Mexico to Walt Disney Co.—that allegedly were provided “misleading” descriptions of how BNY Mellon executed currency transactions.
For the most recent civil suits, Schneiderman is seeking over $2 billion in lost profit to state pension funds. Bharara is looking for hundreds of millions of dollars on behalf of the U.S, the New York Times reported.