Bank of New York Mellon Settles $28 Million Whistleblower Lawsuit with Florida

Florida Attorney General Pam BondiOn November 1, 2013, the State of Florida entered into a $28 million settlement agreement with The Bank of New York Mellon ("BNY Mellon"). This settlement concludes one of several lawsuits filed by a Delaware general partnership formed by several whistleblowers and their lawyers in other jurisdictions under the federal False Claims Act and several state false claims acts.

Since 2005, the State of Florida entrusted its state pension fund to BNY Mellon, which is “the world's largest trust bank with about $26 trillion in assets under custody and administration,” according to Reuters. However, in 2011, Florida Attorney General Pam Bondi decided to join a lawsuit initiated by a group of whistleblowers under the Florida False Claims Act that, according to the Florida Attorney General, alleged BNY Mellon “improperly reported the State’s foreign currency transactions and kept the difference between that inflated price and the actual execution price.” “Despite the litigation, the Florida State Board of Administration, which includes [the Florida Attorney General], rehired BNY Mellon as the custodian of the trust fund in October,” as reported by the South Florida Business Journal. The Florida Attorney General summarized the settlement as follows:

[The] $28 million settlement with the State of Florida’s custodian bank, the Bank of New York Mellon, [resolves] allegations that the bank overcharged the Florida Retirement System Trust Fund by millions of dollars in its handling of foreign currency transactions. The resolution provides full compensation for the State’s past foreign currency trades and ensures complete transparency on the pricing of future trades. Florida has billions of dollars in international investments that require foreign currency transactions. The settlement also resolves allegations involving investments made by the Bank of New York Mellon on behalf of the Florida Retirement System Trust Fund in medium-term notes issued by Sigma Finance, Inc. Sigma defaulted on certain notes in late September 2008 and subsequently went into receivership.

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