A former senior State Street Corp. executive has entered a plea agreement with prosecutors who accused him and a colleague of plotting to overcharge the company’s clients by millions of dollars through secret commissions on trades.
Edward Pennings on Tuesday pled guilty to conspiracy to commit wire fraud and securities fraud. As part of the deal, federal prosecutors have agreed to dismiss the other charges against him and to push for a lower prison sentence with a judge.
From 2010 to 2011, Pennings and another executive, Ross McLellan, allegedly added the commissions to fixed-income and equity trades performed for institutional clients that State Street (NYSE: STT) assisted with moving investments between and among asset managers.
They charged the commissions even though they were instructed in writing not to charge them, and attempted to hide the commissions by asking that they not be identified in reports on the trades, according to prosecutors. They initially tried to persuade State Street compliance staff that the overcharges were accidental, prosecutors said.
Pennings worked out of State Street’s London office as a senior managing director and head of the company’s portfolio solutions group for Europe, the Middle East and Africa. McLellan lived in Hingham at the time of his arrest last year.
McLellan is still set to go to trial in October on the charges he faces. On Tuesday, prosecutors charged another State Street executive in the U.K., Richard Boomgaardt, in connection with the alleged scheme, Reuters reported.
Earlier this year, State Street itself agreed to pay more than $64 million to end two federal probes into the alleged scheme.
The company has maintained that it has significantly strengthened its internal controls since 2011 and has cooperated with authorities on the matter.
Greg Ryan covers finance, professional services firms and public policy.