State Street said it has reached a settlement with a former managing director of its transition management team following his dismissal from the custodian bank early last year.
Rick Boomgaardt, managing director, head of EMEA Transition Management, left the custodian bank following allegations that the transition management team had overcharged clients such as the Royal Mail pension fund and the Kuwait Investment Authority (KIA) on transition management deals.
It is understood that Boomgaardt, one of several casualties of the alleged over overcharging, was due to appeal against his dismissal at an East London Employment tribunal next week.
His departure followed that of Edward Pennings, formerly State Street Global Markets (SSGM) head of Global Client Solutions and head of EMEA for the banks transition management business, who was dismissed from his duties as senior managing director in September 2011.
Pennings appealed his dismissal at the East London Tribunal in December last year. In February, the tribunal ruled that the former State Street employee should not be compensated for unfair dismissal from the custodian bank. It also ruled that State Street had not followed correct dismissal procedures but also said it was not at fault.
During Pennings tribunal, it emerged that the Royal Mail audited the transition of its global bond portfolio in March 2011 and discovered that mark-ups worth about $1 million were charged on the U.S. leg of the transaction. That amount was paid back to the client. Royal Mail then commissioned an independent study into the transition with the help of performance measurement firm Inalytics, and found evidence of overcharging on the entire transition. The amount outstanding for alleged overcharging on the non-U.S. trades was then also refunded. Pennings had at his tribunal had questioned the ethos around mark ups on transition management deals. Following his and Boomgaardts dismissal the bank had overhauled its transition management team, placing John Minderides at the helm.
A statement from State Street regarding Boomgaardt said: We can confirm that State Street and Rick Boomgaardt have mutually agreed settlement terms in respect of an Employment Tribunal claim. The terms of the settlement are confidential to the parties. We are committed to maintaining the highest standards of conduct. As a result of this issue we have strengthened our transition management business and enhanced our governance and controls.
Meanwhile, the UK Financial Services Authority (FSA) is believed to have commenced a thematic review on transition management. This involves analyzing the market to see if there are wide-scale issues that it needs to act on.
(JDC)