Is CNBC Pimping for State Street Bank?

If street thugs were to hold up a convenience store and drive off with $1 million, it would be national news. But when a venerable Boston bank rips off California's two largest pension funds for $56 million, it's business-as-usual -- at least to the anchors of CNBC.

State Street Bank -- the world's largest servicer of pensions -- systematically ripped off CalPERS and CalSTRS over a period of eight years. It did this by adding a tiny surcharge on foreign currency trades. But this adds up, especially considering that some $35 billion in 42,000 transactions were traded by these funds since 2001.

So when two whistle-blowers filed suit under seal in April 2008, attorneys from my office immediately investigated -- examining hundreds of thousands of pages of documents, interviewing witnesses and subpoenaing records.

They found in the course of an 18-month investigation that State Street was contractually obligated to give CalPERS and CalSTRS the "interbank rate" at the precise time of the trade. Instead, State Street consistently charged at or near the highest rate of the day, even if the
interbank rate was lower at the time of trade. And traders concealed the fraud by deliberately failing to include time stamp data in its reports, so that the pension funds could not determine the true execution costs.

When the suit was filed, we notified the media and held a press conference -- to bring the fraud to light and to deter other financial traders from considering similar action. This is a routine part of prosecuting important corporate fraud cases.

But, in a commentary post today, CNBC anchor Michelle Caruso-Cabrera sneered at California's effort to recover $200 million in damages and penalties, using a made-up quote from Elliot Spitzer to call it "quaint."

This follows an interview Tuesday that was straight out of the Daily Show. CNBC invited me on to talk about the case, and then Caruso-Cabrera asked why I would come on the air to talk about it.

Her co-anchors seemed to have no problem with the rip-off ("as long as they quoted you a dollar and you paid the dollar, what do you care what they got it for") and questioned the integrity of the whistle-blowers ("that whistle-blower -- is that a private law firm that you guys have hired to do this for you?") Unbelievable . And for the record, the whistle-blowers are industry insiders who have yet to be named.

The tone and substance of the interview are symptomatic of the Eastern financial elite, who think that $200 million is small potatoes, and big business should be given the benefit of the doubt.

In my book, there's nothing quaint about corporate fraud. There's nothing quaint about ripping off pension funds. And, I -- along with attorneys general from across the nation -- will continue to bring these high-priced rip-off artists to justice.

Visit my website, www.jerrybrown.org

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Comments

[windychicago]

I think it is so interesting that Jerry Brown is charging State Street Bank with perpetrating fraud for the last eight years against the pension funds of CalPERS and CalSTRS at a time when the bigger and real problem is with the internal management of these same two funds who created far larger frauds, inefficiencies and speculative real estate, timber and infrastructure investments which generated far greater losses over the same eight year period. Is the politician Jerry blowing smoke in an attempt to cover for his friends? It definitely seems that the real problem with these funds is that they have become tainted and immersed with the politics and politicians of California.

[swkidder]

Jerry:
Rather than assuming fraud first and mistake second, why didn't you contact the bank and request an audit? If State Street - generally a fairly ethical player in an extremely unethical market - refused to consider your request/demand, then go public. You might have a refund on its way as opposed to a huge fight on your hands. Just a possibility?

[dicere]

CNBC an arm of the NBC, chief cheerleader for the Obama administration. O did you know GE is not part of the pay cuts even though they have received and not paid back a substantial sum of money is some cases larger than those who have been hit. Could it be that Jeff Emelt president of GE and advisor to the president is somehow different than those others who took tarp money?

[rnmina]

I stopped watching CNBC last September; it was obvious they knew what was happening but were waiting for their partners in corporate to come on line and tell us. They were pathetic. Each day they asked, "Where are the CEOs?"
I began to watch Bloomberg News; CNBC berating Obama for the state of our financial world, calling him out on cable on his policies to help improve our dire situation, when they were never critical of Bush, left me annoyed and resentful.

[eyepatch]

Yes Jerry, the Wall street banker types look at
200 million as a proverbial drop in the bucket but
these banks routinely think that to "churn and burn"
their clients is how to make the bottom line look
better. But the people they hurt is always the little
guy....

I think President Obama idea of making the Big Banks
adhere to each states banking regulations is a great idea
because not only will they have the Federal bank examiners
looking at them but each individual state's bank examiners
as well.....

It is time that these type of practices brought "jail time" as
a deterent for Wall Street bankers from doing this sort of thing.
You refered to it as fraud but the american public looks at it
as theft and thieves should be put in jail...

Thanks for bring this out.....

[Jazzbeau]

Go get 'em Jerry!

I stopped watching CNBC a couple of years ago when their pro corporate, anti worker, Neocon promoting, Bush worshipping comments all day long just got to be too much. They have given up even trying to give the appearance of balanced reporting and become a business oriented version of Faux News.

Long live Bloomberg!

[judyj]

Jerry Brown, I respect everything you do so go get those banks [and our money back], including your run for Governor, please hurry up...

[Jason87]

Give em hell, Jerry!

We need people like you to lead, to govern, and to set the right course for the right actions.

[ErnestPayne]

I never cease to be amazed at the credence given to the low level of quality in the american media (pbs/npr and the Christian Science Monitor excepted). For quality and depth the foreign media win hands down.

[fran-pan]

thank- you A.G. Brown. thank God someone is trying to stop the corporate greed. we have no idea how much this affects our lives. then that phoney journalist on cnbc who was trying to be so clever.
she ended up looking very foolish.

[57basque]

Jerry if you are a Lawyer, as I know you are. Bring Court cases against the greedy. I want that big party of Isaiah 25 where fine food and drinks will party for about a month, or as long as it takes to fix things.

Even if it takes throwing the kings in jail so we can use the profits for those who need them, as Isaiah 23:17-18 and 24: 21-24 talks about.

Bring them to Court Jerry Brown. You first name is not Charlie..

[libdemannie]

AG Brown, Thanks for looking out for the pensioners. The banks are so dirty that they no longer know or care what is legal or not. They have been given a license to steal by the Congress, past and current president, and the so-called regulators. Please continue to go after them. If you can get some of them locked up, that would be great.

[Renault]

I will briefly recount what happened to me when I chose to move my employer sponsored 401K from State St. Bank to my own broker back in 2000.

I filled out the appropriate forms, submitted them as my former employer said to, and waited for the transfer to take place. This should have taken 3-5 days. After a week of no movement, I inquired, why? I got a run around and was told it would happen soon. Still no movement for another week. More run around on the phone. I called my former employer's head retirement guy and he set up a teleconference call between the three of us and in no uncertain terms told them that there had been other incidents like this and they had better get my money and anyone else's transfered in the allotted time! That finally got it done.

However, I have often speculated that the money pool in which my 401K resided may well have been out on temporary duty elsewhere than where it should have been. That is 100% pure speculation on my part, but given the tenor of those days, that scenario or something like it would not have surprised me. And to now read about this happening to other retirement funds does nothing to make think that my pure speculation couldn't have actually been possible. FWIW

[Jesster]

A long, long time ago, I briefly resided in Schnectady, NY.

Don't know what it's like there now, but back then you could start out from any point, any street or road, anywhere in the whole town (city) and they all led to ... GE!

[thebeerdoctor]

But of course CNBC would sneer at the State Attorney General's inquiry, because that would entail having to acknowledge integrity. That is simply too much too expect from well paid readers of the latest corporate newspeak. They know where their bread is buttered.