State Street to pay $12 million in SEC settlement
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State Street Corp. agreed to pay $12 million to settle civil charges with federal securities regulators in an alleged pay-to-play scheme for Ohio pension contracts that also has ensnared a Boston lobbyist and major Democratic party fund-raiser.
An investigation by the Securities and Exchange Commission found that a former State Street executive made a deal with Ohio's then-deputy treasurer to provide illicit cash payments and campaign contributions in exchange for business.
In return, the SEC said, the Boston-based financial services giant received contracts to handle administrative services for three public pension funds.
State Street disclosed the settlement in a public filing Thursday but neither admitted nor denied the SEC's allegations.
A former State Street executive, Vincent DeBaggis, 56, of Plymouth, agreed to pay $174,203, including interest, plus a $100,000 penalty. DeBaggis also did not admit or deny the charges, according to the SEC.
DeBaggis allegedly led State Street to enter into a purported lobbying agreement with an immigration lawyer named Mohammed Noure Alo, the SEC said, who had connections to Ohio's then-deputy treasurer, Amer Ahmad.
From February 2010 to April 2011, State Street paid $160,000 in fees to Alo, and a substantial portion of that was routed to Ahmad, the SEC said.
In a statement, State Street spokeswoman Anne McNally said the company removed DeBaggis from his job upon learning of the alleged conduct, and that he was "ultimately terminated."
The SEC also alleged that Boston lawyer Robert Crowe, a lobbyist for State Street, participated in the scheme. He cochaired John F. Kerry's finance committee when Kerry ran for president in 2004.
The SEC filed a civil complaint against Crowe on Thursday in federal court in Ohio, alleging that he was enlisted by DeBaggis to raise campaign funds for the Ohio deputy treasurer. The regulator said that in March 2010, Crowe met Ahmad's demand for campaign contributions by illegally filtering $16,000 through his personal bank account and reimbursing individuals for contributions made in their own names.
Crowe's Ohio lawyer, Arthur McMahon 3rd, called the SEC allegations "patently untrue." In a statement, he said Crowe did not violate securities laws or pay-to-play rules and noted, "we are confident that Mr. Crowe will be vindicated in due course."
"Pension fund contracts cannot be obtained on the basis of illicit political contributions and improper payoffs," said Andrew J. Ceresney, director of the SEC's Enforcement Division, in a statement. "DeBaggis corruptly influenced the steering of pension fund custody contracts to State Street through bribes and campaign donations."
Ahmad and Alo have been criminally convicted for other misconduct during Ahmad's tenure and are currently serving terms in federal prison, according to the SEC.
In 2012, State Street's McNally said, the company stopped the practice of hiring consultants to solicit business.
State Street has been involved in a number of regulatory matters in recent years, including allegations of overcharging clients for foreign currency trading.
In December, the company said an internal investigation had turned up at least $200 million in client overcharges on expenses such as postage and printing over 18 years. Secretary of State William F. Galvin has asked State Street for more information on the problem.
State Street in 2014 had disclosed the federal pay-to-play investigation in Ohio and last year said it received a Wells notice, warning that the SEC could file charges.