By Carrick Mollenkamp
NEW YORK, Nov 8 (Reuters) - Bank of New York Mellon Corp agreed to a deal with Virginia over allegations it overcharged the state pensions plans for currency trades, according to public records and sources.
The terms of the deal between the bank and state officials representing the Virginia Retirement System Fund and other state pensions plans were not immediately known.
Virginia sued BNY Mellon in state court and was seeking $1 billion in damages.
BNY Mellon said in a statement it has renewed its contract with the Virginia state pension for another five years. But the bank declined to comment on any deal over the litigation.
The settlement ends one legal chapter for the bank, but it still faces many other lawsuits from pensions funds in other states.
Virginia’s case was among the first to allege the bank was converting currency based on prices at the end of the day instead of when the trades took place, potentially costing clients millions of dollars.
BNY Mellon, which traces it roots back to Alexander Hamilton and is the nation’s oldest bank, has been vigorously challenging the lawsuits.
The Virginia lawsuit filed by Virginia Attorney General Kenneth Cuccinelli was an outgrowth of an earlier suit brought by a whistleblower group that sued the bank on behalf of the Virginia Retirement System Fund and pension plans in Arlington and Fairfax counties.
Among those involved in the whistleblower group was Harry Markopolos, best known for giving an early warning to U.S. securities regulators that Bernard Madoff was running a Ponzi scheme. The whistleblower was a senior BNY Mellon foreign-exchange trader named Grant Wilson.
Virginia has paid the whistleblower group $1.1 million for its role in aiding the state’s case.
Cuccinelli looked for $120 million in damages and about $811.6 million in civil penalties. In the lawsuit, he claimed BNY Mellon “as custodian bank for the Virginia funds knowingly and systematically earned hundreds of millions of dollars” by improperly charging for certain types of currency transactions.
The Virginia claim was dealt a setback in May when a state judge in Virginia dismissed a lawsuit that alleged the bank overcharged for currency transactions. At the time, the judge ruled the Virginia complaint did not in fact meet the threshold for a state false claims act.
But the judge did leave the door open for Virginia to refile. Virginia then filed an amended complaint in July.
The settlement was disclosed last month in meeting minutes for the Fairfax County Board of Supervisors.
A spokesman for Cuccinelli did not return request for comment.