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.