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Report: Internal bank papers show worry over Florida pursuit of pension fraud

An informer in a state fraud case against Bank of New York Mellon Corp. offered prosecutors an inside look at how the bank allegedly scrambled to contain a government investigation into whether the bank overcharged Florida's state and local pension funds, among others, to execute currency trades.

The allegations center on claims the bank enriched itself by providing unfavorable currency-exchange rates for state and local pension funds for a decade.

The inside glance comes in hundreds of pages of BNY Mellon confidential documents submitted to Florida prosecutors by lawyers for bank whistle-blower and former bank currency trader Grant Wilson. The Wall Street Journal reported Wednesday that a senior BNY Mellon executive nicknamed "Rambo" urged traders not to tell clients how much money they made on trading.

The Journal says bank officials "worried clients would switch to negotiating their own foreign-exchange trades, where the bank's profit margin was far lower," according to an internal bank memo.

The bank also altered its website, changing the wording of its trading practices. And, the Journal reports, when a veteran bank official heard about the government investigation, she said: "It's over, it's all over," according to the informer.

Wilson, 53, operated as a government informer for two years while working as a currency trader at BNY Mellon. He is part of a whistle-blower group that can seek a share of as much as 25 percent of any recovery the states obtain in many of the BNY Mellon cases.

In August, Florida Attorney General Pam Bondi filed her lawsuit against the bank in Leon County. Four other states and the Manhattan U.S. attorney also have filed civil lawsuits against BNY Mellon, seeking with Florida a total of more than $2 billion in damages. The Department of Justice also has sued the bank.

BNY Mellon denies wrongdoing and is fighting the suits. A bank spokesman told the Journal: "A handful of purported statements cherry-picked from millions of documents gathered over a decade, do not reflect the way we do business or the value we provide our clients."

Information from the Wall Street Journal and Times wires was used in this report.

Report: Internal bank papers show worry over Florida pursuit of pension fraud 12/28/11 [Last modified: Thursday, December 29, 2011 7:54am]
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