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Treasurer lawsuit targets bank for $15 million

March 16, 2012

Oregon seeks to lead securities lawsuit against Bank of New York Mellon and recover $15.7 million in losses triggered by foreign currency trading scandal
By Oregon State Treasurer

Oregon Treasurer Ted Wheeler and Attorney General John Kroger announced that Oregon is seeking to co-lead a class action lawsuit and recover at least $15.7 million from Bank of New York Mellon Corp. that was lost to the Oregon Common School Fund and Oregon Public Employees Retirement Fund.

The state also seeks to help other similarly situated investors recover losses they suffered due to securities fraud engineered by the New York-based financial institution.

A motion filed Monday in U.S. District Court in New York seeks to make Oregon a co-lead plaintiff in an existing securities fraud class action case. The losses were triggered by a foreign currency exchange manipulation scheme, which came to light after whistleblowers alleged that BNY Mellon was rigging prices to obtain higher profits.

The lawsuit alleges that instead of buying and selling foreign currency at the “best execution standards,” as promised, BNY Mellon would charge clients the least favorable rates and pocket the difference in profits.

Oregon did not have any foreign currency transactions through BNY Mellon. However, the Common School Fund and Oregon Public Employee Retirement Fund (OPERF) were damaged because the fraudulent practices and subsequent outrage caused the value of Oregon’s holdings of BNY Mellon stock to plummet.

“We will not stand for fraud that damages our funds and harms the public trust,” said Treasurer Wheeler, who sits on the Oregon Investment Council and has a fiduciary duty to protect public assets and maximize returns for beneficiaries of state trust funds.

“Holding major financial institutions accountable is a high priority,” said Attorney General Kroger.

The Oregon State Treasury and Oregon Investment Council bought and sold shares in BNY Mellon between April 2008 and June 2011 on behalf of OPERF and the Oregon Common School Fund. In that span, the value of those shares fell from $42.06 to $24.86, a decline of 41 percent.

OPERF lost more than $14.5 million and the Oregon CSF lost approximately $1.2 million.

During that period of time, BNY Mellon misled investors by failing to describe what was actually happening inside the company. Specifically, that as much as 69 percent of the profit from foreign exchange trading was derived from an illicit price manipulation scheme, according to the complaint.

The Oregon Treasury authorized the Department of Justice to pursue the lawsuit. The Oregon legal action is separate from those of public funds in other states that traded in foreign currencies and were separately harmed by the price fixing scheme.

The State Treasury protects public assets and saves Oregonians money through its investment, banking, and debt management functions. The office also promotes public outreach and education to help Oregonians learn strategies to save money, invest for college and make smart financial choices.

  
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