BNY Mellon to pay $714 million to settle foreign exchange cases
(Reuters) - Bank of New York Mellon Corp has agreed to pay $714 million to resolve cases accusing the bank of overcharging pension funds and other clients for foreign exchange services, U.S. federal and state authorities said on Thursday.
The settlements end lawsuits filed by the Manhattan U.S. Attorney and New York attorney general, among others, that claim BNY Mellon told clients it would provide the best possible execution for their currency transactions, but instead gave them the worst rates of the day. Meantime, BNY Mellon obtained better spot prices for itself and profited on the spread.
As part of the agreements with New York and the U.S., the bank accepted responsibility for the conduct, authorities said.
The bank also agreed to terminate David Nichols, its head of products management, and other executives, Manhattan United States Attorney Preet Bharara said. The other executives were not identified.
BNY Mellon executives knew the bank's representations about foreign exchange pricing were false, the authorities said.
BNY Mellon, one of the world's largest custodial banks, 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 actions.
?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 litigation.
New York Attorney General Eric Schneiderman's lawsuit, which began when a whistleblower filed a complaint with the attorney general's office in 2009, claimed that the bank earned $2 billion over ten years through the alleged deception. The U.S. lawsuit said the bank defrauded clients of hundreds of millions of dollars between 2000 and 2011.
Ohio Attorney General Mike DeWine said the class-action, which was partly led by two Ohio pension funds, was settled for $335 million, pending court approval, after four years of "hard-fought" litigation.
BNY Mellon will pay a penalty of $167.5 million to the U.S. New York state also will get $167.5 million, nearly all of which will compensate victims of the misconduct, authorities said. The rest of the monies 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.
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.
(Reporting By Karen Freifeld and Nate Raymond in New York. Additional reporting by Jonathan Stempel.; Editing by Christian Plumb, Bernard Orr)