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State Street Corporation Message Board

  • statham.green statham.green Feb 15, 2013 2:22 PM Flag

    What's your opinion?

    http://news.yahoo.com/irish-debt-agency-accuses-state-175320826.html

    A case of simple negligence or criminal intentions? What do you folks think?

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    • capitalist_c@rocketmail.com capitalist_c Mar 12, 2013 1:14 PM Flag

      Hard to imagine this as anything other than criminal activity. I wouldn't be concerned though. Not even these no good crooks would dare mess with the FSA. Their track record is much better than their American counterpart.

    • Link isn't working for me but it is still available in cache.

      "DUBLIN (Reuters) - Ireland's national debt agency has accused U.S. financial services firm State Street Corp of fraud for overcharging the country's pension fund during a transaction last year.
      State Street has admitted overcharging the debt agency by 3.2 million euros (2.6 million pounds) after it was hired to manage the sale of 4.7 billion euros of assets to fund the recapitalisation of Ireland's banks.
      The error was reported by Ireland's Comptroller and Auditor General last month.
      The head of the National Treasury Management Agency (NTMA) John Corrigan told a parliamentary committee on Thursday that the mistake was fraudulent. He said he had reported the matter to the Irish police and had told the UK regulator, the Financial Services Authority (FSA).
      "What happened here was fraudulent in nature and it's totally unacceptable," he said. "We have communicated this view ... very clearly and in unequivocal terms to State Street."
      State Street said in a statement that "certain employees failed to comply with the high standards of conduct, communication and transparency that we expect," adding that those individuals no longer worked for the firm.
      Corrigan said he had met with the vice president of State Street to discuss the issue.
      "Fraudulently, in my view, within State Street there was 0.7 percent chipped off the sale price that they got when they went out onto the open market," during the sale of the assets, Corrigan said.
      Ireland's finance minister Michael Noonan said he had every confidence in the NTMA and that Corrigan was right to reveal to the public that something untoward had happened.
      "I understand that everything which was misappropriated has been repaid so there is no loss to the state," Noonan said.
      ($1 = 0.7801 euros)
      (Reporting by Conor Humphries and Lorraine Turner; Editing by David Holmes)"

    • More on this from aiCIO:

      "Senior managers gave the go-ahead for the State Street transition management team to take “undisclosed mark-ups” on bond trades for one of the Middle East’s largest investors, a former employee has claimed.

      (December 3, 2012) – A member of State Street’s dismissed transition management team has claimed senior management within the bank approved the practice of taking “undisclosed mark-ups” on client transactions and accused the firm of making him a fall guy.

      Edward Pennings, who led the division in Europe, the Middle East and Africa for State Street, told an employment tribunal in London on Friday that he had been informed a group--including David Puth, the firm’s former global head of global markets who left shortly after Pennings and Ian Holden, the former head of agency trading in EMEA for the bank--had approved a business model that would allow the transition management team to make secret profits from clients’ portfolio shuffles.

      Pennings told the tribunal that he had been informed by his immediate boss, Ross McLellan who was also dismissed by the company, that the model had been approved and that the client was not to be made aware that mark-ups would be made by the bank.

      The tribunal was brought by Pennings in London, who has claimed he was unfairly dismissed by the bank last year after the discovery of the practice that saw the bank repay several million pounds and euros to affected large pension fund investors. State Street maintains Pennings was dismissed for having lied to clients.

      To support his case, Pennings said a deal with the $296 billion Kuwait Investment Authority (KIA), a Middle Eastern sovereign wealth fund (SWF), had been the first where the business model was implemented. The model would see State Street buying a bond on the open market, selling it on to its transition management client at a premium and booking the revenue without the client’s knowledge. He said McLellan had told him that the senior group had approved the new model of taking undisclosed mark-ups for the deal.

      The lawyer representing State Street at the tribunal denied this was the case, stating that his law firm, Freshfields, had found no evidence such approval had been given. He said the KIA had itself removed a clause from an agreement between the two parties that would have prevented State Street from making this type of revenue. Pennings responded that this was not evidence that the SWF had agreed to the practice, but that it was not fully aware of what the clause meant.

      In the autumn of 2011, State Street dismissed several people within the State Street Global Markets division and reshuffled various others over the transition management mark-ups. The United Kingdom’s Royal Mail pension fund and the Irish National Treasury Management Agency (NTMA), which was investing pension fund money, were refunded the value of the mark-ups made on their bond portfolio transitions."

      • 1 Reply to statham.green
      • "At the tribunal Pennings queried why the allegations against him changed from actually taking these undisclosed mark ups to repeatedly lying to the bank’s client, Royal Mail when confronted about the charges.

        State Street’s lawyer said that even if the business model had been approved by the higher echelons of the bank, lying to a client warranted a charge of gross misconduct and was a sackable offence.

        Pennings retaliated that there had been a culture of “don’t ask, don’t tell” about the mark-ups. He said: “I thought ‘non-disclosed’ meant non-disclosed. We had never discussed what would happen if a client ever asked about it.”

        The Royal Mail contacted Pennings after having engaged consultant Inalytics to analyse the data of the transition. Over the course of several emails, the State Street employee responded that a $1 million overcharge on the US bond portfolio “did not seem right” and he would investigate and revert with information for the fund.

        A further $2 million made on the transition of the European bond portfolio was never raised by Pennings, despite a call for full disclosure by Inalytics, State Street’s lawyer said.

        Pennings maintained that Inalytics was solely investigating the US bond portfolio due to the Trade Reporting and Compliance Engine (TRACE), which tracks US bond trades and is not present in Europe. Judge Housego, who was overseeing the tribunal, questioned this point due to the letter from the consulting firm asking for a picture of the “global bond” portfolio. Pennings added, however, that he and other members of the portfolio solutions group had wanted to reveal the full extent of the mark-ups, but had been overruled by senior management. This was refuted by State Street’s legal representative.

        The lawyer then accused Pennings of misleading the bank’s compliance team over the matter. He said Pennings had told Mark Leaden within the compliance team, that the $1 million to be repaid to Royal Mail had been due to an inputting error, rather than having been made intentionally. Pennings strenuously denied this claim, saying Leaden had been mistaken in his reporting of the conversation the two had on the matter. Pennings quoted Leaden as saying: “I used to be a bond trader, I know how you bond guys make your money,” then adding that the letter to be sent to the Royal Mail pension fund would be deliberately vague. State Street refuted the claim.

        Regarding the excess revenue made on transitions for Royal Mail and NTMA, which totalled around $5.5 million, Pennings said sector heads in Europe would have known where it had come from as it had been booked in a different place than usual. He said Steve Smit, formerly State Street's head of Global Markets Europe and Investor Services UKMEA who co-signed the Royal Mail agreement with a stated fee of just over £227,000, and back office/operations department heads Ian Scott and Patrick Waller would also have known where the excess revenue had come from. Pennings claimed he raised the issue of undisclosed mark-ups in relation to the $5.5 million revenue at a meeting with senior EMEA State Street managers, but the bank’s lawyers said there was no mention of this in the minutes to support the claim.

        The bank’s lawyers said Pennings and his boss McLellan had been boosting the department’s revenue for personal gain. This was repeatedly denied by Pennings, who said the pair was trying to protect the bank and its business model. He added that the same practice had been standard when trading foreign exchange on clients’ behalf for over 15 years, but it had become accepted by all sides rather than vilified.

        He added that anyone investigating the matter inside State Street – Richard Lacaille, executive vice president in the bank’s asset management unit who had led the probe into Pennings’ activity and was present at the tribunal– would have realised that the practice was widely known, or he would have to conclude that there was a cover-up being initiated by the bank. After the tribunal, a spokesperson from State Street told aiCIO: “Mr Pennings’ actions fell seriously short of the standards and conduct expected of any employee at State Street and we have zero tolerance for this. We have addressed the issues directly with the clients that were impacted. His allegations regarding broader involvement of State Street management in approving his actions are completely without merit. We are disappointed that he has been unable to take responsibility for his behaviour and that he has chosen this current course of action.”

        The tribunal concluded today with lawyers from either side entering submissions to the tribunal on their client’s behalf. A decision on whether Pennings was unfairly dismissed is expected before the end of the year.

        Elizabeth Pfeuti
        European Editor, aiCIO"

 
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