BNY Mellon overcharged Mass fund $20 mln on forex

By Svea Herbst-Bayliss

BOSTON (Reuters) – Bank of New York Mellon Corp overcharged the Massachusetts teachers, police officers and bus drivers at least $20 million on currency trades that the bank handled for the state’s pension fund, top state officials alleged Monday.

Steven Grossman, the state’s treasurer, will release a report later on Monday that will offer new details on foreign exchange abuses committed by Bank of New York Mellon over the last four years, a spokesman for Grossman said.

Grossman and Michael Trotsky, executive director for the state’s $50 billion pension fund, will hold a news conference on Monday afternoon to discuss a review of currency trading which was conducted by independent consultant FX Transparency.

A spokesman for Bank of New York Mellon said the bank did not have an immediate comment.

Massachusetts is one of a handful of states investigating whether companies like BNY Mellon and others cheated public pension funds on currency transactions by failing to charge the funds the rates that the banks paid, and instead forcing them to pay the day’s highest rates and pocketing the difference.

BNY Mellon has been sued by Florida and Virginia, which charged that the bank failed to give them lowest prices.

Pension funds, like other big investors who trade in foreign stocks, rely on so-called custody banks like BNY Mellon to exchange dollars for foreign currencies so that they may make their purchases.

For many trust banks, currency trading has become a lucrative business.

BNY Mellon has been working with the Massachusetts fund for at least a decade.

In afternoon trade, BNY Mellon was up 26 cents to $26.54. (Reporting by Svea Herbst-Bayliss; Editing by Lisa Von Ahn and Gerald E. McCormick)