California Attorney General accuses State Street bank in pension fraud

California’s Attorney General Jerry Brown today accused Boston-based State Street bank of committing “unconscionable fraud” against California’s two largest pension funds, CalPERS and CalSTRS, the retirement funds for public employees and teachers.

Brown announced he’s filed a lawsuit in Sacramento Superior Court that alleges State Street overcharged CalPERS and CalSTRS for foreign currency trades.

State Street and other institutional investment banks commonly buy and sell foreign currency and pay an interbank rate when they do.

Brown says State Street instead charged the highest rate of the day, or close to it, and covered up the deed by failing to include a time stamp on trade records.

Brown estimates that over eight years, State Street pocketed nearly $57 million in overcharges.

The lawsuit seeks $200 million in damages and penalties.

A spokeswoman for State Street says the firm "categorically" denies any wrong-doing.