Ohio Treasurer Mandel questions bank charges to pensions

Columbus Dispatch ^ | Wednesday, June 15, 2011 03:06 AM | By Julie Carr Smyth

[DeaconBenjamin]

State Treasurer Josh Mandel has asked for a probe into whether banks manipulated foreign exchange rates charged to Ohio public pension funds and the state's injured-worker insurance, potentially costing pensioners and businesses tens of millions of dollars in the past 12 years.

In a letter yesterday requesting that Ohio Attorney General Mike DeWine launch the probe, Mandel said he is concerned that the banks might have engaged in improper currency-trading practices "to maximize the banks' profits, at the expense of Ohio public servants, businesses and taxpayers."

State lawmakers have been debating ways to shore up the long-term financial stability of Ohio's public pension funds, considering proposals that adjust employee and state contributions, trim benefits and increase retirement ages, among other cost-cutting measures.

A growing number of states are pursuing either investigations or lawsuits against two rival banks that provide foreign investment services to pensions and other investment funds: State Street Corp. and Bank of New York Mellon Corp.

The U.S. Securities and Exchange Commission and the U.S. attorney's office also are investigating.

Bank of New York spokesman Kevin Heine and State Street spokeswoman Alicia Curran both said their banks had no comment.

Four of Ohio's five public pension funds - the Ohio Public Employee Retirement System, School Employees Retirement System of Ohio, State Teachers Retirement System of Ohio and the Ohio Police & Fire Pension Fund - have international investments handled by one of the banks. Combined, they have about $39 billion invested in international securities.