Richard Mahoney, chief executive in charge of global markets for Bank of New York Mellon, is retiring from the company at the end of June.
Why does anyone in Virginia care? Because Mahoney headed the division of the corporation responsible for foreign currency exchanges, the investment tool at the heart of a multimillion dollar lawsuit filed in Virginia alleging that the company defrauded the Virginia Retirement System, the public employee pension fund.
In January, Attorney Gen. Ken Cuccinelli (R) moved to take over the case from the whistleblower who had originally filed the suit under seal in 2009. A similar lawsuit is pending in Florida, where Attorney Gen. Pam Bondi has also moved to intervene.
The issue is being watched closely enough by industry experts that a company spokesman felt the need to tell the Wall Street Journal that Mahoney’s resignation was unrelated to the lawsuits. Bank of New York Mellon has denied the charges and said they plan to fight the suits.
Virginia’s lawsuit, unsealed by a judge in January, contends that since 2001, currency traders for Bank of New York Mellon had been skimming profits of foreign currency transactions conducted on Virginia’s behalf, by falsely reporting the rate at which currency was exchanged.
Bank of New York Mellon has served as Master Custodian of the VRS pension fund since 1988. According to the attorney general’s office, the bank is paid $4.5 million a year to hold and protect Virginia’s pensions. It manages $55.1 billion in state and local government retirement funds
The suit was originally filed by a Delaware-based partnership called FX Analytics, whose members, according to the legal complaint, had “personal knowledge” of the fraud based on “extensive knowledge and experience” with Bank of New York Mellon.
FX Analytics has sought $150 million in damages for the state but would collect a portion of the award if Bank of New York Mellon loses or the case settles.
Now, all parties await a filing from Cuccinelli formally outlining the state’s case against the bank and how much Cuccinelli’s office believes would be appropriate for the company to pay in damages.
A spokesman for Cuccinelli said Wednesday that the attorney general’s office sought an extension of a court deadline for the filing and now must submit the complaint by May 24.
Did the extension request come because settlement talks are underway between the Commonwealth and the massive New York financial institution?
“We have nothing more we can say right now,” said Cuccinelli spokesman Brian Gottstein.