Corrigan tells Oireachtas committee that State Street held back cash following the sale of assets
STATE Street Bank "defrauded" the National Treasury Management Agency of €3.2m after it had been hired to handle a €4.7bn asset sale for the state agency, said John Corrigan, the head of the NTMA.
The alleged fraud was perpetrated when the bank held back some of the cash raised from the sale of assets without authorisation, Mr Corrigan told the Oireachtas Public Accounts Committee (PAC).
The issue of overcharging by State Street was raised by the Comptroller and Auditor General in September – but Mr Corrigan went much further in his comments yesterday.
"What happened here was fraudulent in nature; we have communicated this view to State Street," he said.
Finance Minister Michael Noonan backed him up. Speaking at an event in Dublin, he said: "I thought he (Mr Corrigan) expressed it very well.
"I have great confidence in John Corrigan personally and the NTMA and I thought he was right to reveal to the public if he thought something untoward happened – and it did."
He added: "There is no evidence of other cases, it's entirely exceptional and very surprising."
The NTMA was one of a number of the bank's clients hit with similar overcharging by State Street, Mr Corrigan said, adding that the money from the overcharging remained within the bank.
State Street, which is based in the US, employs 2,000 staff in Dublin, Dundalk, Kilkenny and Naas.
The former head of the bank's Irish operations, Willie Slattery, recently moved to a more senior pan-European role with the organisation.
None of the Irish units is implicated in the alleged fraud, which allegedly happened at the bank's London unit.
The matter was "self-reported" to the UK's Financial Services Authority (FSA) in September 2011, State Street said in a statement.
It continued: "In a limited number of instances, we charged commissions on transition-management mandates that were not consistent with our contractual agreements.
"As a result of our own internal analysis, we have determined that certain employees failed to comply with the high standards of conduct, communication and transparency that we expect.
"Those individuals are no longer with the company."
The allegations are the subject of an ongoing investigation by the FSA, said Mr Corrigan.
He told the committee that gardai had been alerted to the alleged fraud but were now waiting for the results of the FSA investigation before deciding on any action.
The FSA's report is expected to be released before the end of the year.
State Street's London unit had been hired by the National Pension Reserve Fund (NPRF) – which is part of the NTMA – to manage the sale of €4.7bn of assets in 2010.
The cash was to be used to fund rescue deals for AIB and Bank of Ireland.
The bank provided a service known as 'transition management'. The contract for the work included a fixed fee of €698,000 for the bank, with no other commissions due, Mr Corrigan said.
However, the bank "clipped" or held back around 0.7pc of the value of assets as they were sold, without authorisation, he told the TDs and senators.
The NTMA continues to engage in other business with State Street, which manages a €900m share portfolio on behalf of the State.
The agency and the banks are understood to be in talks.