Bank of New York Mellon won a small victory last Friday in one of its many pending lawsuits when a Virginia judge threw out two of the three charges against it. BNY Mellon is one of several custody banks facing legal action by pension funds and other large investors over controversial foreign exchange (“forex”) trading practices.
Fairfax County Circuit Court Judge Terrence Ney dismissed two of the three types of false claims allegations submitted by the state’s Attorney General’s Office. The state dropped a third charge originally levied against the bank, leaving one charge remaining. In a statement, BNY Mellon said that “We are pleased that the court dismissed two of the three remaining claims brought by (Virginia) and we are gratified that the judge scheduled a prompt hearing on the one remaining claim.”
However, the Virginia Attorney General’s Office remains undaunted: “There were three alternate theories of how the bank violated the law. Two of the three theories were dismissed without prejudice, which means the commonwealth can refile them if it chooses. But the central claim … remains.” The remaining claim accuses BNY Mellon of intentionally creating false forex pricing reports in violation of the Fraud Against Taxpayers Act.
At a hearing scheduled for December 21st, the bank will have a second chance to have this final charge dismissed. Meanwhile, BNY Mellon is fighting to have the charges dropped in other states, including Florida. In a filing last week, the bank insisted that forex contract for Florida’s pension system “does not contain any promise to buy and sell foreign currencies to and from the fund at ‘actual cost’ or at the rates that BNY Mellon itself obtained on the interbank market.”
BNY Mellon is also running into problems with its own employees. Two people have filed lawsuits against their employer alleging a breach of fiduciary duty in the management of retirement funds. According to plaintiffs Joanne Terrazas and Diane Brogna, the bank “made a series of false and misleading statements and omissions regarding the exchange rates the company” used during forex transactions. Like the pension fund lawsuits, these employees feel deceived and defrauded by the exchange rate policies.