State Street Corp. agrees to pay $115 million in fraud case

State Street Corp. has entered into a deferred prosecution agreement and pledged to pay a $115 million criminal penalty to resolve charges that it conspired to defraud clients by secretly overcharging for expenses related to the bank’s custody of their assets, officials said Thursday.

The Boston-based global financial services company admitted that between 1998 and 2015 executives schemed to add secret markups to “out-of-pocket” expenses charged to clients, despite written agreements that said State Street was not earning a profit, according to a statement from the US attorney’s office.

Executives also tried to conceal the markups by not disclosing expense details on invoices and misleading clients who asked about the charges, ultimately defrauding clients out of more than $290 million, according to prosecutors.

State Street was charged with one count of conspiracy to commit wire fraud and agreed to pay $115 million and cooperate with any investigations or prosecutions related to the acts, the statement said. The corporation also agreed to enhance its compliance program and hire an independent corporate compliance monitor for a period of two years.

A spokesman for State Street said the company had made the agreement to resolve the “inquiry into the overcharges to some of our custody customers for items billed as out-of-pocket expenses, which we disclosed in 2015.”

“We regret these overcharges, which have also been the basis of prior settlements with regulators including the Securities and Exchange Commission,” the spokesman, Edward Patterson, said in a statement. “We have also invested, and continue to invest, significant resources to improve and strengthen our invoicing processes, controls and governance.”

State Street agreed to fully reimburse the victims of the misconduct and has already repaid most with interest, Patterson said.

Acting US Attorney Nathaniel R. Mendell said the company had “defrauded its own clients of hundreds of millions of dollars over decades in a most pedestrian way: they tacked on hidden markups to routine charges for out-of-pocket expenses.”

“The resolution requires State Street to take responsibility for the damage it caused and is a signal from us that financial giants will be held accountable for fraudulent conduct,” he said in a statement.