BNY policies fair to Duke, admins say

Bank of New York Mellon has conducted fair foreign currency trades with the University’s assets, Duke officials said.

Last week, the New York attorney general and the United States attorney in New York City each filed lawsuits against BNY Mellon—led by Trustee Gerald Hassell, Trinity ’73 and chairman and CEO of the company.

The two lawsuits, which were filed Oct. 4, claim that the company defrauded its clients in fees associated with foreign currency trades.

The Duke University Management Company maintains accounts with BNY Mellon for trading purposes, wrote Michael Schoenfeld, vice president for public affairs and government relations, in an email Tuesday. In the 2010-2011 fiscal year, the amount in question regarding Duke-BNY Mellon transactions is approximately several hundred thousand dollars, out of a $5.8 billion endowment, he added.

“The financial impact on Duke of the alleged practices would not be significant,” Schoenfeld said. “Our view is that the foreign exchange trades BNY Mellon has executed for Duke have been fair.”

DUMAC continues to hold accounts with BNY Mellon, he noted. Duke is not involved in the lawsuits.

These lawsuits will have no effect on Hassell’s membership to the Board of Trustees, Schoenfeld said, noting the particular process for University business conducted with Trustees’ companies.

“When the University does business with companies that are affiliated with Trustees, those transactions are disclosed to the Board through the conflict of interest process and then are reported on the IRS Form 990,” Schoenfeld said.

Board Chair Richard Wagoner, former president and CEO of General Motors Corp. and Trinity ’75, and DUMAC President Neal Triplett, Trinity ’93 and Fuqua ’99, both declined to comment.

Hassell joined the Board in July. He was named chairman and CEO of BNY Mellon Aug. 31 when his predecessor, Richard Kelly, stepped down.

BNY Mellon spokesman Kevin Heine said there is no connection between the lawsuits and Kelly’s recent resignation.

Both suits claim that BNY Mellon overcharged customers for processing foreign transactions. They allege that BNY Mellon promised its clients the most competitive transaction rate on any day, but BNY Mellon allegedly charged higher transaction rates, according to the lawsuits. Preet Bharara, the U.S. attorney in New York City, filed a civil complaint seeking hundreds of millions of dollars in penalties. New York Attorney General Eric Schneiderman filed a civil lawsuit on behalf of state clients affected, which seeks $2 billion—the approximate amount the bank profited due to its allegedly fraudulent policies during the last 10 years.

Representatives from Bharara and Schneiderman’s offices declined to comment.

BNY Mellon said the allegations in the New York attorney general’s suit is based on faulty information and inaccurate analysis, according to press release Oct. 4.

The company said the U.S. attorney’s suit is similarly inaccurate.

“It fundamentally misunderstands and mischaracterizes the global foreign exchange market and the valuable services we provide to our clients as a principal in foreign exchange transactions,” according to the company’s official statement. “We will fight these claims vigorously and are confident we will prevail.”

Heine said BNY Mellon’s communication with its clients, such as Duke, will continue as normal throughout the litigation process. He noted that the suits have prompted discussions about foreign currency transaction services.

“The company always has ongoing, regular communication with all of its clients,” Heine said. “It’s important to point out that we feel confident about the benefits of the service and the disclosure about the suits have been clear to our clients.”

Heine added that he does not believe a date for a court appearance has been set.


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