A US jury on Tuesday found a former State Street Corp. executive guilty of defrauding clients by secretly overcharging them on fixed-income and equity trade fees.
US prosecutors said that Ross McLellan, formerly global head of asset transitions at the Boston-based bank, schemed to ramp up commissions on billions of dollars in trades at the clients’ expense. McLellan, 46, was convicted on five of six counts including conspiracy, securities fraud, and wire fraud.
McLellan was one of four State Street’s executives who worked to help institutional clients change their fund managers or investment strategies. Instead, they devised a scheme to overcharge clients without their consent although they were told that commissions would be fully disclosed and agreed upon in advance, according to charges by the US Justice Department.
During the three weeks trial, jurors investigated the defendants’ communications with six institutional investors, who were charged hidden markups on State Street’s electronic platform for trading US Treasuries.
The overcharging scheme began in February 2010 through at least September 2011 as the fierce competition in the sector squeezed profit margins. According to court filings, the asset managers conspired to target large fixed-income and equity trades for unauthorized charges, which they believed “would be less likely to draw [the] attention of regulators.”
The defrauded victims included a New York division of an insurance company, two European government pension funds, and a Middle East sovereign wealth fund.
This case relates to the same indictments for which the UK arm of State Street was fined $32.4 million to settle related criminal charges with the Financial Conduct Authority in 2014.
