State Street Corp. agrees to pay $64.6M to resolve fraud charges

STATE STREET CORP. recently agreed to pay $64.6 million to resolve fraud charges that stem from a criminal investigation into the company defrauding at least six of its clients.
STATE STREET CORP. recently agreed to pay $64.6 million to resolve fraud charges that stem from a criminal investigation into the company defrauding at least six of its clients.

BOSTON – State Street Corp. recently agreed to pay $64.6 million to resolve fraud charges that stem from a criminal investigation into the company defrauding at least six of its clients.

The financial services giant agreed to pay a $32.3 million criminal penalty to resolve the criminal investigation, and $32.3 million as a civil penalty to the U.S. Securities and Exchange Commission, according to a press release issued by the U.S. Attorney’s Office of Massachusetts.

“State Street cheated its customers by agreeing to charge one price for its services and then secretly charging them something else,” said Acting U.S. Attorney William D. Weinreb. “Banks that defraud their clients in this way must be held accountable, no matter how big they are.”

The governor in April also charged two men, former executive vice president Ross McLellan and former senior managing director Edward Pennings, with conspiracy, securities fraud and wire fraud in connection with the company’s scheme. The two executives are scheduled to go to trial in October.

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State Street admitted to conspiring to add secret commissions to fixed income and equity trades performed for at least six clients, according to the release. The commissions were charged on top of fees, and the company took steps to hide the commissions from clients.

“State Street engaged in an elaborate overcharge scheme, which resulted in millions of ill-gotten profits and violated the trust of their clients,” said Harold H. Shaw, special agent in charge of the FBI, Boston Field Division.

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