A whistleblowers' lawsuit has prompted the State of California to sue State Street Bank for over $200 million. The suit alleges, and California's Attorney General has confirmed, that State Street cheated California pension funds by overcharging for foreign exchange transactions. State Street Bank slyly used the trading day’s highest possible exchange rate to charge the pension funds, instead of the agreed upon interbank rate at the time of the trade. To avoid scrutiny, the bank hid the timestamps when reporting to the California Public Employees’ Retirement System and the California State Teachers’ Retirement System. The Attorney General's investigation confirmed the overcharges, and has intervened in the suit. The Superior Court for Sacramento has now unsealed that lawsuit. The Attorney General's press release provides a copy of the lawsuit. Hannah Grove, State Street spokeswoman, responded to the Boston Business Journal, “We categorically deny any allegations of wrongdoing and we will defend ourselves against any litigation.”
Intern Tommy Leung contributed to this blog post. He imagines that State Street probably engaged in the same practice for its other clients, including every other state and local government that used them for their investments. Tommy and I share an appreciation for the unnamed whistleblowers who brought State Street's overcharges to light, and we wonder if there are others out their who could come forward in any of the other 25 states that have false claims acts and and reward whistleblowers.