Ex-State Street executive to plead guilty in U.S. to fraud scheme

June 6, 2017 5:08 pm
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By Nate Raymond

BOSTON A former State Street Corp executive has agreed to plead guilty in connection with a scheme to defraud six clients through secret commissions on billions of dollars of trades, according to court papers filed on Tuesday.

Edward Pennings, a former senior managing director in State Street's London office, has agreed to plead guilty to one court of conspiring to commit wire fraud and securities fraud, according to a plea agreement filed in federal court in Boston.

In addition, Richard Boomgaardt, who was head of State Street's transition management desk for Europe, the Middle East and Africa, was charged with one count of conspiring to commit wire fraud and securities fraud.

Boomgaardt, who lives in the United Kingdom, was charged by "information," a type of document that prosecutors usually use in connection with defendants who intend to plead guilty. It was unclear if he had reached a plea deal.

No plea hearing has been scheduled yet for Pennings, who lives in the United Kingdom. Lawyers for Pennings and Boomgaardt did not respond to requests for comment.

The former State Street executives are among three who have been charged by U.S. prosecutors since April 2016 in connection with the probe. The bank agreed in January to pay $64.6 million to resolve related U.S. criminal and civil investigations.

The case followed a 2014 settlement between State Street and the UK Financial Conduct Authority in which the Boston-based bank paid a fine of £22.9 million, or $38 million at the time, for charging the six clients mark-ups on certain transactions.

Prosecutors said that from 2010 to 2011, Pennings, Boomgaardt and Ross McLellan, a former executive vice president, conspired to add secret commissions to fixed income and equity trades performed for certain clients.

Prosecutors said the clients were using a State Street unit that helps institutional customers move investments between asset managers or liquidate large investment portfolios.

The commissions, which the former executives took steps to hide, came on top of fees the clients agreed to pay despite written instructions to the bank's traders that they should not have to do so, prosecutors have said.

The clients included a Middle Eastern sovereign wealth fund, a public pension fund in Dublin, Ireland, and a pension fund for British government employees, according to court papers.

McLellan has pleaded not guilty to securities fraud and wire fraud charges. His trial is scheduled for October.

The cases in U.S. District Court, District of Massachusetts, are U.S. v. McLellan, et al, No. 16-cr-10094, and U.S. v. Boomgaardt, No. 17-cr-10167.

(Reporting by Nate Raymond in Boston; Editing by Leslie Adler and Tom Brown)


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