by Grant McCool NEW YORK | Wed Oct 5, 2011 3:58pm EDT "NEW YORK (Reuters) - A years-long investigation into whether Bank of New York Mellon Corp and other banks overcharged clients on foreign-exchange transactions has risen to a new level with a civil fraud action by federal prosecutors who police Wall Street. The move late Tuesday by the U.S. Department of Justice -- and a separate lawsuit brought the same day by New York's attorney general -- rattled investors in BNY Mellon stock. Analysts said on Wednesday that the legal action adds to risks for the company, which along with State Street Corp is also facing foreign- exchange lawsuits in other states. MORE THAN $2 BILLION SOUGHT" http://www.reuters.com/article/2011/10/05/us-bankofnymellon-forex-idUSTRE7945RA20111005
"BNY Mellon has signaled it would fight both lawsuits. Spokesman Kevin Heine said both sets of prosecutors had a "fundamental misunderstanding" of the foreign exchange market and the role of custodial banks. He said the lawsuits suffered "the same flawed analysis" of the banks' services to clients in foreign exchange transactions." Curious to see how this plays out - whether or not the AG actually understands the market or of this is just another NYS AG shakedown.
Yeah, just as I thought, a shakedown: BNY Mellon âSledgehammerâ Lawsuits Raise Pressure to Settle, Barbash Says Bank of New York Mellon Corp. (BK), the largest custody bank, faces increased pressure to reach settlements on foreign-exchange cases following new lawsuits brought by New York and federal officials. The New York attorney general and the U.S. Attorneyâs Office in Manhattan, each of which filed complaints yesterday, bring deeper resources and more expertise on financial cases, Barry Barbash, head of the asset-management group at law firm Willkie Farr & Gallagher LLP, said in an interview from his Washington office. New York Attorney General Eric T. Schneiderman can also wield the stateâs powerful Martin Act, he said. âThe Martin Act is a fairly significant sledgehammer of a statuteâ that makes it easier for prosecutors to prove fraud compared with many other statesâ laws, said Barbash, a former director of the U.S. Securities and Exchange Commissionâs division of investment management. The New York suit, brought yesterday in the stateâs Supreme Court, accuses BNY Mellon of defrauding public pension funds of $2 billion over 10 years. The U.S. Attorneyâs Office filed a separate suit in federal court. Florida and Virginia have also filed claims against the bank and Massachusetts regulators are investigating similar claims. cont.