Banking, finance, and taxes

SEC Settles Pay-to-Play Scheme With State Street Bank

Chris Lange

Published: January 15, 2016 10:55 am

Last Updated: January 13, 2020 2:59 pm

The U.S. Securities and Exchange Commission (SEC) announced that State Street Bank and Trust has agreed to pay $12 million to settle charges in regards that it conducted a pay-to-play scheme through its then-senior vice president and a hired lobbyist. This was in an effort to win contracts to service Ohio pension funds.

The SEC investigation found that Vincent DeBaggis, who headed State Street Corp.’s (NYSE: STT) public funds group responsible for serving as custodians or sub-custodians to public retirement funds, entered into an agreement with Ohio’s then-deputy treasurer to make illicit cash payments and political campaign contributions. In exchange, State Street received three lucrative sub-custodian contracts to safeguard certain funds’ investment assets and effect the settlement of their securities transactions.

Andrew J. Ceresney, director of the SEC’s Enforcement Division, commented:

Pension fund contracts cannot be obtained on the basis of illicit political contributions and improper payoffs. DeBaggis corruptly influenced the steering of pension fund custody contracts to State Street through bribes and campaign donations.

DeBaggis agreed to settle the SEC’s charges by paying $174,202.81 in disgorgement and prejudgment interest and a $100,000 penalty.

The agency further alleges that Robert Crowe, a law firm partner who worked as a fundraiser and lobbyist for State Street, participated in the scheme and entered into undisclosed arrangements with the then-deputy treasurer to make secret illegal campaign contributions to obtain and retain business awarded to State Street.

David Glockner, director of the SEC’s Chicago Regional Office, said:

Our complaint alleges that Crowe served as a conduit for corrupt payments from State Street to influence decisions about public pension fund service contracts. Pay-to-play schemes are intolerable, and lobbyists and their clients should understand that the SEC will be aggressive in holding participants accountable.

The $12 million that State Street agreed to pay in the settlement includes $4 million in disgorgement and prejudgment interest and an $8 million penalty.