May 9 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
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
"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."