Virginia suit against BNY Mellon dismissed; VRS renews with custodian
By Hazel Bradford | November 9, 2012 4:27 pm
A Virginia judge dismissed on Friday a lawsuit filed by Virginia Attorney General Kenneth Cuccinelli against Bank of New York Mellon (BK) over claims that it charged the $54 billion Virginia Retirement System, Richmond, excessive foreign-exchange fees.
The dismissal of the suit follows an agreement in which the pension fund renewed its contract with BNY Mellon for global custody, securities lending and foreign-exchange services for five years, with an additional five-year option.
The agreement also calls for a payment of $1.14 million to a whistle-blower involved in the case. The source of the whistle-blower payment funds could not be confirmed by press time.
Fairfax County Circuit Court Judge R. Terrence Ney entered the order dismissing the case Friday.
BNY Mellon was sued by Mr. Cuccinelli in August 2011, accusing the bank of violating state law by charging “undisclosed markups” on currency-exchange trades, and sought more than $800 million in damages for fees charged to VRS and two other public pension plans in Virginia, the $5.6 billion Fairfax County Retirement Systems and the $1.5 billion Arlington County Retirement System.
On May 1, Mr. Ney ruled that the state's legal premise did not allow the case to continue.
Officials at VRS and Mr. Cuccinelli's office were unable to provide the fee terms of the extended contract, but Caroline Gibson, a spokeswoman for Mr. Cuccinelli, said in an e-mail that the agreement “has conferred significant financial benefits for Virginia employees and retirees. The VRS and the other funds … have informed us that the terms of the 10-year renewal are favorable to their members.”
Ms. Gibson said that the VRS board of trustees “urged the resolution, believing it was in the best interests of their beneficiaries.”
VRS paid $4.7 million in custodian fees to BNY Mellon in 2010 and $4.4 million in 2011.
BNY Mellon spokesman Kevin Heine declined to discuss the specifics of the fee arrangement. “We've had good-faith negotiations with our client, and we're pleased that the case is over,” he said in a telephone interview.