UPDATE 2-State Street loses bid to dismiss Arkansas case
May 9 (Reuters) - A U.S. judge in Boston has denied a motion by State Street Corp to dismiss claims that the custody bank overcharged an Arkansas pension fund on its foreign currency trades.
State Street is accused of concealing markups on forex trades made on behalf of the Arkansas Teacher Retirement System. The bank denies any wrongdoing.
U.S. District Judge Mark Wolf allowed the civil fraud case filed by the Arkansas pension fund to proceed against State Street Bank & Trust, a key unit of the Boston-based custody bank. The judge's order was entered on Tuesday, court papers show.
"We are disappointed in the court's decision and continue to vigorously defend the allegations regarding our indirect FX services made in the civil proceedings commenced against us," State Street said in a statement.
The pension fund, which reported more than $8 billion in assets when it filed the lawsuit last year, is seeking a class-action claim against State Street. The bank, which is fighting similar claims by pension funds in other parts of the country, has denied any wrongdoing in court papers.
State Street has disclosed in regulatory filings that its forex business is the subject of several investigations, including by the U.S. Department of Justice, the U.S. Department of Labor and the U.S. Securities and Exchange Commission. The bank has said various entities have requested information or issued subpoenas in connection with inquiries into the pricing of its foreign exchange services.
But in its motion to dismiss, State Street argued that the Arkansas pension fund and its money managers were sophisticated customers and behaved much like consumers who buy in bulk at large discount warehouses such as Costco Wholesale Corp with the goal of saving money.
"Of course, Costco has no duty to disclose the actual relationship between what it pays for its goods and the prices at which it sells," State Street said in a memorandum to support its dismissal motion. "This is equally true as to FX."