TheU.S. Justice Department on April 5 said it charged Ross McLellan, formerexecutive vice president at StateStreet Corp., and Edward Pennings, former senior managing director,with securities and wire fraud. McLellan had also served aspresident of State Street's U.S. broker/dealer unit.
Prosecutorsclaim that McLellan and Pennings, among others, conspired to add commissions tofixed income and equity trades performed for at least six "transitionmanagement" clients, despite written instructions not to do so. They alsoallegedly tried to hide said commissions from clients, other co-workers and thebank's compliance staff.
McLellanhas been arrested. The Wichita (Kan.) Eagle reported the same day that he haspleaded not guilty. "Every major bank charges its clients markups on itsbond transactions in order to generate profits. And every dollar that is atissue in today's charge was received not by Mr. McLellan, but by the Bank forwhich he worked," the Eagle quotedhis lawyer as saying.
Penningshas yet to be arrested.
The Eagle added that the defrauded clientsinclude Irish and British government pension funds, as well as a Middle Easternsovereign wealth fund.
Thecase follows a 2014 settlement between the bank and the U.K. FinancialConduct Authority, pursuant to which State Street paid a $37.8 million fine.