'Forex Probe Ramps Up As Government Steps In' - banks

[Wallace]

by Grant McCool NEW YORK | Wed Oct 5, 2011 3:58pm EDT

"NEW YORK (Reuters) - A years-long investigation into whether Bank of New
York Mellon Corp and other banks overcharged clients on foreign-exchange
transactions has risen to a new level with a civil fraud action by federal prosecutors
who police Wall Street.
The move late Tuesday by the U.S. Department of Justice -- and a separate
lawsuit brought the same day by New York's attorney general -- rattled investors
in BNY Mellon stock. Analysts said on Wednesday that the legal action adds to
risks for the company, which along with State Street Corp is also facing foreign-
exchange lawsuits in other states.
MORE THAN $2 BILLION SOUGHT"
http://www.reuters.com/article/2011/10/05/us-bankofnymellon-forex-idUSTRE7945RA20111005

 

[JamesL]

"BNY Mellon has signaled it would fight both lawsuits. Spokesman Kevin Heine said both sets of prosecutors had a "fundamental misunderstanding" of the foreign exchange market and the role of custodial banks. He said the lawsuits suffered "the same flawed analysis" of the banks' services to clients in foreign exchange transactions."

Curious to see how this plays out - whether or not the AG actually understands the market or of this is just another NYS AG shakedown.

 

[JamesL]

Quote from JamesL:

Curious to see how this plays out - whether or not the AG actually understands the market or of this is just another NYS AG shakedown.

Yeah, just as I thought, a shakedown:

BNY Mellon ‘Sledgehammer’ Lawsuits Raise Pressure to Settle, Barbash Says

Bank of New York Mellon Corp. (BK), the largest custody bank, faces increased pressure to reach settlements on foreign-exchange cases following new lawsuits brought by New York and federal officials.

The New York attorney general and the U.S. Attorney’s Office in Manhattan, each of which filed complaints yesterday, bring deeper resources and more expertise on financial cases, Barry Barbash, head of the asset-management group at law firm Willkie Farr & Gallagher LLP, said in an interview from his Washington office. New York Attorney General Eric T. Schneiderman can also wield the state’s powerful Martin Act, he said.

“The Martin Act is a fairly significant sledgehammer of a statute” that makes it easier for prosecutors to prove fraud compared with many other states’ laws, said Barbash, a former director of the U.S. Securities and Exchange Commission’s division of investment management.

The New York suit, brought yesterday in the state’s Supreme Court, accuses BNY Mellon of defrauding public pension funds of $2 billion over 10 years. The U.S. Attorney’s Office filed a separate suit in federal court. Florida and Virginia have also filed claims against the bank and Massachusetts regulators are investigating similar claims.

cont.