California Attorney General Jerry Brown is suing State Street Bank and Trust (SST), seeking $200 million in damages for allegedly defrauding the state's giant pension funds.

"Over a period of eight years, State Street bankers committed unconscionable fraud by misappropriating millions of dollars that rightfully belonged to California's public pension funds," Brown said in an e-mailed statement. "This is just the latest example of how clever financial traders violate laws and rip off the public trust."
According to the lawsuit, filed Tuesday in state court in Sacramento, Calif., State Street allegedly overcharged CalPERS and CalSTRS, the two pension funds, for foreign-exchange trades and tried to cover up the charges by altering transaction records.

The case was filed last year under California's whistle blower law, which allows anyone with knowledge of fraud to sue on behalf of the state and share in any damages recovered, Brown's office said in the statement.

State Street didn't immediately return calls seeking comment, but several news organizations reported that the company "categorically denies" any wrongdoing in the case.

Earlier Tuesday, State Street said it posted earnings of $516 million, or $1.04 a share, in the third quarter, matching the average estimate of analysts polled by Thomson Reuters. That's compared to a gain of $477 million, or $1.09 a share, a year ago.

CEO Ronald Logue said the economy was improving but "the pace of the rebound is slow" in a statement.

For California's funds, the largest public-employee pension plans in the country, it's the second scandal in as many weeks. Last Wednesday, CalPERS revealed that it was investigating a former member of its board who allegedly received $50 million in fees for arranging investments in the fund.

A review of the fees was "prudent" in light of other alleged "pay-to-play" arrangements at public pension plans around the country, said CalPERS CEO Anne Stausboll in a statement.

Increase your money and finance knowledge from home

Small Cap Investing

Learn now to invest in small companies the right way.

View Course »

Investing in Real Estate

Learn the basics of investing in real estate.

View Course »

Add a Comment

*0 / 3000 Character Maximum

1 Comment

Filter by:

any one person making 50 million in fees for doing ANYTHING WITH A PUBLIC FUND should be taken out behind the barn. All of the management team that would let one person PLAY with that much of a public fund should be removed from office a long time ago. There are just way to many people thinking they can play with other peoples futures without any concern. WHAT IS WRONG WITH THIS PICTURE????????!!!!!!!!!!!!!!!!!!

January 10 2011 at 8:40 PM Report abuse rate up rate down Reply