A United States District Court judge in California has dismissed several of the claims made against BNY Mellon in the lawsuit filed against the custodian by whistleblower FX Analytics and ten public pensions in the state. The plaintiffs claim BNY Mellon overcharged them on foreign exchange transactions, among other complaints.
The judge ruled in favor of BNY Mellon to dismiss the complaints that relate to the California False Claims Act, including accusations that BNY Mellon made false claims for payment; reverse false claims against the government; and a false record or statement material to a false or fraudulent claim.
The judge said that because monthly transaction reports sent to the pensions by BNY Mellon did not constitute claims for payment, the custodian could not be tried under the California False Claims Act. The judge also dismissed the claim that BNY Mellon engaged in unjust enrichment. A BNY Mellon spokesperson has said the firm is pleased that the court dismissed the most serious claims.
The plaintiffs were given 21 days to file an amended complaint if it clearly explains how the amendments cure the defects identified herein.
Charges against BNY Mellon claiming breach of contract; breach of fiduciary duty; fraud by concealment; and unlawful, unfair or fraudulent business act or practice remain but must be transferred to other state courts, the judge ruled.
BNY Mellon reached a settlement earlier this year with the Justice Department, with the custodian agreeing to be more transparent about the way it prices its foreign exchange transactions. The custodian still faces lawsuits and claims of fraud by public pensions in New York, Virginia, Florida, Ohio and Massachusetts.
Last month, the treasurer of the state of Ohio replaced BNY Mellon and State Street as custodians for four public pensions in the state with J.P. Morgan and Citi, saying, I feel that I have a duty to end custodial agreements with banks being sued for defrauding taxpayers.
The lawsuits have led some BNY Mellon shareholders to call for an independent chairman to be appointed at the firm; currently Gerald Hassell serves as chairman and CEO.
Independent board leadership helps instill the kind of culture of oversight and accountability that we believe guards against the types of fraudulent practices alleged to have occurred at BNY Mellon, Bill Patterson, executive director of the CtW Investment Group, wrote in a letter last month to fellow BNY Mellon shareholders. CtW funds own about 6 million shares of BNY Mellon, according to the firm.
The proposal to appoint an independent chairman will be voted on at a BNY Mellon shareholder meeting on April 10.
The pensions suing BNY Mellon in the California lawsuit are: Oakland Police and Fire Retirement System Fund; Santa Barbara County and the Santa Barbara County Employees Retirement System Fund; San Luis Obispo and the San Luis Obispo County Employees Retirement Plan; Merced County and the Merced County Employees Retirement System Fund; Mendocino County and the Mendocino County Employees Retirement Association Defined Benefit Fund; Tulare County and the Tulare County Employees Retirement Association Fund; the City of Los Angeles and the Los Angeles Water and Power Employees Retirement Plan (LAWPER); Los Angeles County and the Los Angeles County Employees Retirement Association Fund (LACERA); San Diego County and the San Diego County Employees Retirement Association Fund (SDCERA); and Stanislaus County and the Stanislaus County Employees Retirement Association Fund (SCERA).
(CG)