FLEECED: State Street Agrees to Pay to Resolve Fraud Charges
In a serious blow to market and client confidence, Custodial giant State Street Corporation entered into a deferred prosecution agreement and agreed to pay a US$32.3 million criminal penalty to the U.S. Department of Justice (DOJ) to resolve charges that it engaged in a scheme to defraud a number of the bank’s clients by secretly applying commissions to billions of dollars of securities trades. State Street is a global custodian for many pensions, endowments and sovereign funds. Victims of the scheme have been fully repaid and were trading clients in Europe (Irish and U.K. government pensions), the Middle East (a sovereign wealth fund) and Africa.
“State Street engaged in a concerted effort to fleece its clients by secretly charging unwarranted commissions,” said U.S. Acting Assistant Attorney General Bitkower in a press release.
“State Street deeply regrets this matter and accepts responsibility for the actions of its former employees,” State Street said in a public statement. “The company fully reimbursed the six clients that were impacted, terminated responsible employees, appointed new executives to lead its transition management business, and implemented new and stronger controls.”
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