Edward Pennings, a former managing director of State Street Corp., is pleading guilty to charges that he committed wire and securities fraud in connection with the firm’s clients.
According to court documents filed June 6 in the U.S. District Court for the District of Massachusetts, Pennings faces possible incarceration for five years, supervised release for three years and a potential $250,000 fine. The case against him, and Ross McLellan, a former State Street executive v.p., involved secret commissions applied to billions of dollars of securities trades, according to a U.S. Department of Justice statement made in April 2016 about the charges.
“We deeply regret this matter and accept responsibility for the actions of our former employee,” a State Street spokeswoman said in an email. “We reimbursed the impacted clients, terminated responsible employees, appointed new executives to lead our transition management business.”
She said that “over the past five years we have taken significant steps to strengthen our controls for our transition management business, and more broadly to enhance our compliance program, culture and operating environment.”
This matter has been disclosed in State Street’s public filings since 2012 and was the focus of the firm’s agreement with the Department of Justice and Securities Exchange Commission earlier this year, the spokeswoman said.
Roger Burlingame, a lawyer for Pennings in London, couldn’t immediately be reached for comment.
Pennings was indicted in March 2016 along with Ross McLellan, a former State Street executive v.p. and head of the bank’s broker-dealer. Prosecutors alleged that the State Street executives were adding secret commissions to trades of at least six clients. “McLellan and Pennings then allegedly took steps to hide the commissions from the clients and others within the bank, including compliance staff,” the DOJ said in its April 2016 announcement of the indictment.
McLellan pleaded not guilty in April 2016, the Boston Globe reported at the time.
“The secret conversations and backroom plotting laid bare in today’s charges paint a vivid picture of a brazen fraud,” said Carmen M. Ortiz, U.S. attorney for Massachusetts, in the DOJ statement.
In July, the SEC announced that State Street agreed to pay $382.4 million in a global settlement for misleading mutual funds and other custody clients by applying hidden markups to foreign currency exchange trades. The firm also settled with British regulators, paying $38 million over the matter in 2014.
