NEW YORK, March 19 (Reuters) - Four Ohio pension funds are cutting ties on Monday with Bank of New York Mellon Corp and State Street Corp, which have come under investigation for defrauding customers in currency exchange transactions.
BNY Mellon and State Street, which had been appointed as custodians to hold approximately $41 billion for Ohio public-pension funds, would be replaced by JP Morgan Chase Bank NA and Citibank NA, Ohio state Treasurer Josh Mandel announced.
Ohio Attorney General Mike DeWine filed a $16 million lawsuit against BNY Mellon on March 12, accusing the bank of overcharging it for foreign currency exchange transactions. The U.S. Department of Justice and several other states have sued State Street alleging similar misconduct.
“I have been fighting against abuse and corruption in banks that serve as international custodians for Ohio pension funds for the last two years, and as treasurer I feel that I have a duty to end custodial agreements with banks being sued for defrauding taxpayers,” Mandel said in a statement.
Last year, Mandel requested an investigation by the attorney general into whether international custodians - which hold securities, stocks, bonds and other investments for pension funds, and conduct financial transactions on their behalf - were overcharging Ohio funds for currency exchange transactions.
State Street said the state “remains a valuable client” and would not otherwise comment on its relationship with Ohio.
A spokesman for BNY Mellon, Kevin Heine, said the bank was “disappointed by the treasurer’s actions”.