Bank of New York Mellon lost a bid for dismissal of a lawsuit brought by the state of Virginia that accuses it of defrauding pension funds in foreign-currency trades.
A judge in Fairfax, Va., on Friday rejected the bank’s argument that the case couldn’t be brought under the Virginia Fraud Against Taxpayers Act because alleged false or fraudulent claims were never submitted to the state for payment.
“You have a cause of action,” Fairfax County Circuit Court Judge Terrence Ney told lawyers for the state during a hearing. “There’s no question about that.” The next hearing in the case is set for Dec. 21.
“We are pleased that the court dismissed two of the three remaining claims brought by the commonwealth and are gratified that the judge scheduled a prompt hearing on the one remaining claim,” R. Jeep Bryant, a bank spokesman, said by e-mail.
State Attorney General Kenneth Cuccinelli sued in August, claiming the bank violated state law by charging “undisclosed markups” on currency-exchange trades to six retirement funds. Virginia is seeking about $931.6 million in damages.
“While the bank states that there were three claims, there was actually only one claim, and that was that the Bank of New York Mellon engaged in a pattern of intentional conduct to defraud the commonwealth, its retirees and its taxpayers,” Brian Gottstein, a spokesman for Mr. Cuccinelli, wrote in an e-mail.
Attorneys general in New York and Florida have sued over the same issue. Massachusetts filed an administrative action against the bank.
All the cases center on the pricing of small foreign-exchange transactions handled automatically by the custody banks on behalf of the pension funds, a service known as standing instruction.