Prosecutors assisted by whistleblowers are widening an investigation into whether banks overcharged public pension funds in the United States by tens of millions of dollars for foreign-exchange transactions, the Wall Street Journal reported.
The report cited court documents and people familiar with investigations by state attorneys general in California, Virginia, Florida and Tennessee that it said could reveal more about the $4 trillion-a-day international foreign-exchange market.
An entity called FX Analytics sued Bank of New York Mellon
The lawsuit seeking $150 million in damages, was filed in 2009 and taken over by Virginia state prosecutors last month, the Wall Street Journal reported.
A spokesman for the bank could not immediately be reached outside of business hours in New York.
The WSJ report quoted a statement by the bank as saying: We believe the lawsuit is without merit and we intend to defend it vigorously.
Another lawsuit involves State Street Corp
The lawsuit alleged that the Boston-based firm raided the custodial accounts of California's two largest public pension funds in excess of $56 million by fraudulently pricing foreign currency trades.
A spokeswoman for the bank could not immediately be reached outside of business hours in Boston. The WSJ quoted a State Street statement as saying the firm believed its FX services are consistent with our contractual obligations with the California state entities, and we are defending ourselves against the charges made in the complaint.
The whistleblowers, who are using Delaware shell companies to remain anonymous, may have worked at State Street and Bank of New York Mellon, the report said. It identified one of the whistleblowers as Harry Markopolos, a Boston-based investor who for years warned regulators about epic swindler Bernard Madoff, but no action was taken against him until his firm collapsed in December 2008.
The Wall Street Journal said prosecutors were looking into whether banks charged state pension funds the most expensive foreign-exchange price during the day when a trade took place, rather than the rate the bank paid, and when currencies were sold, paid them the lowest price for the day.
(Editing by Lincoln Feast)