Former State Street Executive Pleads Guilty in Scheme to Defraud Clients Through Secret Trading Commissions
Second executive also agrees to plead guilty
BOSTON – A former executive of Boston-based State Street Corporation pleaded guilty today to conspiring to defraud at least six of the bank’s clients through secret commissions applied to billions of dollars of securities trades. A second executive of the bank has agreed to plead guilty to participating in the conspiracy at a hearing scheduled for later this month.
Edward Pennings, 46, of Surrey, England, pleaded guilty to one count of conspiracy to commit securities fraud and wire fraud. U.S. District Court Judge Leo T. Sorokin scheduled sentencing for Dec. 11, 2017.
According to admissions made in connection with the guilty plea, Pennings, a former senior managing director of State Street Corporation and the head of its Portfolio Solutions Group for Europe, the Middle East and Africa, conspired to add secret commissions to fixed income and equity trades performed for at least six clients of the bank’s “transition management” business, which helps institutional clients move their investments between and among asset managers or liquidate large investment portfolios. The commissions were charged on top of fees the clients had agreed to pay the bank, and despite written instructions to the bank’s traders that generally reflected that the clients were not to be charged trading commissions.
Richard Boomgaardt, 44, of Sevenoaks, England, a former managing director of State Street who reported to Pennings, was separately charged on June 6, 2017, with one count of conspiracy to commit securities fraud and wire fraud. Boomgaardt is scheduled to plead guilty on July 12, 2017 before U.S. District Court Judge Denise J. Casper.
In March 2016, Pennings and Ross McLellan, 45, of Hingham were charged in a five-count indictment. The charges against McLellan, a former executive vice president of State Street and president of its broker-dealer subsidiary in the United States, are pending.
Acting United States Attorney William D. Weinreb of the District of Massachusetts, Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, and Harold H. Shaw, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division, made the announcement. Assistant U.S. Attorney Stephen E. Frank, Chief of Weinreb’s Economic Crimes Unit, and Trial Attorney Aisling O’Shea of the Criminal Division’s Fraud Section are prosecuting the case.
The charges contained in the charging documents are merely accusations. The remaining defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.