US - California attorney general Edmund Brown has sued State Street for US$200m for allegedly overcharging the nation's two largest pension funds for currency trades.
Brown said for the past eight years, State Street allegedly overcharged the California State Teachers' Retirement System and the California Public Employees Retirement System, eventually cheating them out of a combined $56.6m.
Brown claims that State Street added a mark-up to the interbank foreign currency trades, the price at which banks buy and sell currencies, by charging the two funds the highest rate of the day, instead of the rate at which the trade was conducted.
State Street spokeswoman Carolyn Cichon said: "We categorically deny any allegations of wrongdoing and will defend ourselves against any litigation."
Brown said: "Over a period of eight years, State Street bankers committed unconscionable fraud by misappropriating millions of dollars that rightfully belonged to California's public pension funds. This is just the latest example of how clever financial traders violate laws and rip off the public trust."
The attorney general said State Street allegedly concealed its activities by failing to time-stamp its reports to the pension funds.
Officials at CalSTRS and CalPERS said they will cooperate with the investigation.
CalSTRS spokeswoman Sherry Reser said: "The complaint raises serious allegations and CalSTRS is cooperating with the Office of the Attorney General in its investigation. CalSTRS cannot comment on pending litigation."
CalPERS spokesman Clark McKinley said: "We were pleased to cooperate with the Office of the Attorney General in its investigation and fully support the decision of the Attorney general to prosecute these claims."
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