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State raises estimate of overcharge

By Beth Healy
June 30, 2011

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Treasurer Steven Grossman yesterday said the state pension fund suffered even higher overcharges on foreign exchange transactions than previously disclosed — $30.5 million dating back to 2000.

The state had previously said that the pension fund was overcharged $20 million by Bank of New York Mellon Corp. since January 2007. After receiving the results of that audit, Grossman asked the consultants to go further back in time to examine foreign exchange trading costs.

The audits come as several other states are pursuing whistle-blower cases against BNY Mellon and Boston-based State Street Corp. for the way they charge large clients for foreign exchange services on stock trades, particularly in emerging markets.

Mellon has denied wrongdoing in the matter with the state’s $50 billion pension fund. Both Mellon and State Street are involved in regulatory inquiries into foreign exchange.

“Given our initial findings, we wanted to take as comprehensive a look as possible at past foreign currency exchanges done on our behalf,’’ said Grossman, who is chairman of the state pension board. “It’s imperative that pension beneficiaries and taxpayers are treated fairly and that banks do not profit disproportionately at their expense.’’

Grossman is in discussions with Attorney General Martha Coakley’s office as to how to pursue the case.