COLUMBUS, Ohio -- Ohio Attorney Gen. Mike DeWine has filed a lawsuit against The Bank of New York Mellon. The lawsuit was filed on behalf of Ohio Police & Fire Pension Fund and School Employees Retirement System and seeks damages in excess of $16 million for losses the complaint alleges were incurred by the funds as a result of BNY Mellon’s fraudulent practices.
The alleged fraudulent practices include breach of contract, fraud, violations of the Ohio Deceptive Trade Practices Act and unjust enrichment.
Previously, the two pension funds that serve thousands of Ohio’s first responders, school employees and their families, entered into individual custodial agreements with BNY Mellon to perform foreign currency exchanges, or FX trades, on their behalf. The funds require these exchange services from their custodian to convert U.S. dollars into the applicable foreign currency when purchasing stock sold on a non-U.S. exchange. DeWine's office examined the FX trades completed by BNY Mellon and found apparent discrepancies between prevailing market rates on the days in which trades were completed, and the rates that the two pension funds were, on average, charged and credited. These discrepancies resulted in millions of dollars in apparent overcharges to both funds.
“As a result of my office’s investigation into this matter, our complaint alleges that BNY Mellon violated the terms of their custodial agreements with the Ohio funds, and exploited the volatility of the foreign currency market to their advantage at the expense of Ohio pensioners and their families,” DeWine said.
In the complaint, the plaintiffs allege that BNY Mellon defrauded the pension funds by systematically overcharging them on currency transactions. At issue in the suit is BNY Mellon’s “standing instruction” service, whereby the pension funds and other clients allow the bank to unilaterally handle their FX transactions. The complaint alleges that BNY Mellon collected the currency trades for their “standing instruction” clients and then later in the day set the price that was most favorable to the bank. The prices were often at or near the day’s least-favorable exchange rates, with the bank profiting from the difference.
Published by The Business Journal, Youngstown, Ohio.