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Virginia Politics
Posted at 06:14 PM ET, 08/11/2011

Bank of New York Mellon sued by Virginia for alleged pension fund fraud

Updated, 10:58 p.m.

Virginia on Thursday sued a major New York financial institution for allegedly defrauding six state and local public pension funds by $40 million, seeking $120 million in damages and $811 million in civil penalties.

The lawsuit, filed in Fairfax County Circuit Court, contends that currency traders for the Bank of New York Mellon defrauded pension funds in Arlington and Fairfax counties and the Virginia Retirement System 73,000 times.

Virginia Attorney General Ken Cuccinelli (R) said that that the bank skimmed profits of transactions conducted on the state’s and localities’ behalf by falsely reporting the rate at which currency was exchanged.

“These are all defined benefit funds,’’ Cuccinelli said in an interview. “This is what backs those defined benefits. So you know when we talk about the solvency of these funds, this is a blow. It brings them closer to insolvency.”

The bank is disputing the claims and will fight them in court, a spokesman said.
“The lawsuit filed by the Virginia attorney general is unwarranted and reflects a flawed understanding of foreign currency markets,’’ Bank of New York Mellon spokesman Kevin Heine said. “We will fight these claims in court and are confident we will prevail. While our first choice is always an amicable resolution, we refuse to be coerced into paying for and admitting to wrongdoing where none exists.”

By  |  06:14 PM ET, 08/11/2011

 
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