Two of the three ex-State Street Corp.(STT) executives whom US prosecutors have charged with bilking six clients via secret commissions on billions of dollars of trades have agreed to plead guilty. Edward Penning, a former State Street Sr. managing director, and Richard Boomgaardt, the former head of the transition management desk for Africa, Europe, and the Middle East, will plead guilty to securities fraud and conspiring to commit wire fraud. Ex-State Street EVP Ross McLellan, who has pleaded not guilty to the criminal charges against him, is scheduled to go on trial later this year.
State Street is a custody bank based in Boston. Its unit that was involved in the securities fraud assists institutional clients in moving investments and liquidating big portfolios.
Penning, Boomgaardt, and McLellan were charged last year in a US probe. Earlier this year, State Street agreed to settle related criminal and civil probes over the men’s alleged misconduct for $64.6M. That’s a $32.3M criminal penalty to the US Justice Department and a $32.3M civil settlement to resolve the US Securities and Exchange Commission’s case. As part of the settlement, the firm admitted that it overcharged six clients of State Street’s transition management business by secretly billing them commissions on billions of dollars in securities trades, including equity trades and fixed-income trades. In 2014, State Street also paid a $38M fine to the UK Financial Conduct Authority for charging the same clients mark-ups for certain transactions.
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