STATE Street Bank "defrauded" the National Pensions Reserve Fund (NPRF) of €3.2m when it held back some cash raised from the sale of assets the bank had been hired to sell for the state agency, the agency’s chief executive John Corrigan told the public accounts committee today.
The cash has now been refunded to the state agency after the bank was informed of the transactions.
The incident is now being investigated by the Financial Services Authority (FSA) in the UK, because the events occurred at the bank’s London unit.
The Gardai have also been informed of the alleged fraud, Mr Corrigan said.
“What happened here was fraudulent in nature, we have communicated this view to State Street,” Mr Corrigan has told the Oireachtas Public Accounts Committee today.
The Irish state agency was one of a number of the bank’s clients hit with similar over charging, Mr Corrigan said.
It is his understanding that the money from the overcharging remained within the bank, he said.
State Street was hired to manage the sale of €4.7bn of assets for the National Treasury Management Agency (NTMA) in order to pay for bank rescues. The bank’s London unit provided a service known as “transition management.”
Mr Corrigan said that the contract for the work included a fixed fee of €698,000 for the bank, with no other commissions due.
The bank however “clipped” or held back around 0.7pc of the value of assets as they were sold, without authorisation, he said.
Mr Corrigan is the head of the NTMA which oversees the NPRF.
The NTMA continues to engage in other business with State Street, which manages a €900m share portfolio on behalf of the state, Mr Corrigan said.