BNY Mellon is being sued in separate cases by the US states of Virginia and South Carolina over FX fees (for the former) and apparently risky investments (the latter), according to several news sources.
Virginia Attorney General Kenneth Cuccinelli has taken over the ongoing case by the Virginia Retirement System against the custodian, which claims BNY Mellon regularly charged the retirement system inflated FX rates, according to the Financial Times. The case has been sealed since it was filed in 2009, but was unsealed by a judge last week. The suit was lodged by a whistleblower, a firm called FX Analytics; it is not clear how the company gained first-hand knowledge of the allegedly inflated fees.
According to the suit, BNY Mellon charged the highest FX rate of the day when making trades on behalf of the retirement system rather than the going rate at the time of the trade.
The Virginia case draws a parallel to the ongoing lawsuit championed by former California Attorney General, and current Governor, Jerry Brown. Brown alleges State Street overcharged CalPERS and CalSTRS, the California retirement systems, on FX fees. See Conspiracy of silence?Global Custodian, Winter Plus 2010.
Meanwhile, in South Carolina, the Associated Press reports that state Attorney General Curtis Loftis is suing BNY Mellon for $200 million. Loftis claims BNY Mellon, as manager of the states investments, invested in risky mortgage-backed securities in its securities lending program even though the state desired a conservative investment regime.
The AP claims the $200 million suit would help close a $829 million gap in the state budget.
As usual when discussing pending lawsuits, BNY Mellon has said the lawsuits are without merit and it plans to defend itself vigorously.