Boston retirement fund says it was overcharged by State Street

September 21, 2011|By Beth Healy, Globe Staff

The director of the City of Boston’s $3 billion retirement fund said it was overcharged by State Street Corp. for foreign-currency trading services in recent years, following a review of those transactions.

The Boston Retirement Board hired an outside firm to review the trading costs amid a widening national probe into the sums big banks charge large investors to exchange currency when they buy and sell stocks in foreign countries. The board said it is working with the state attorney general’s office on the matter.

Daniel J. Greene, the fund’s interim executive director, in response to an inquiry by the Globe, said the board had requested information from Boston-based State Street, and that preliminary analysis shows that, like the state pension fund, “we do have exposure.’’ He added, “The full retirement board has been briefed on this issue and we are in close contact with the AG’s office.’’

The City of Boston retirement fund did not say how large the overcharges might be. Attorney General Martha Coakley’s office declined to comment late yesterday.

The state pension fund, with $50 billion under its watch, has alleged that it was overcharged $29 million over a decade by another large custodian bank, Bank of New York Mellon Corp. But until now, Coakley’s office has been on the sidelines of the issue, despite large similar cases moving forward in California, Florida, Virginia, and Arkansas.

State Street, which is facing lawsuits from the nation’s largest public pension system in California and from the teachers retirement system in Arkansas, said in a statement, “We continue to vigorously defend the allegations regarding our indirect FX services made in the civil proceedings commenced against us.’’

The financial services giant’s contract for so-called custody services, which includes foreign exchange, was recently renewed by the California Public Employees’ Retirement System, known as Calpers.

Bank of New York Mellon denies wrongdoing in its dealings with the Massachusetts pension fund and is defending itself in the Virginia and Florida lawsuits. “We believe the litigation is without merit, and we will defend ourselves vigorously,’’ it said. “We are committed to providing clients with the information needed to make informed trading decisions and always welcome the opportunity to discuss the valuable services we offer.’’

The foreign currency cases were first brought to light by a whistle-blower group led by Harry Markopolos, the Boston accountant who tried to alert the Securities and Exchange Commission to the Bernard Madoff investment scandal. The SEC is investigating State Street and Bank of New York Mellon.