THE CHIEF EXECUTIVE Officer of the National Treasury Management Agency (NTMA) has said that State Street perpetrated a “fraudulent act” by “siphoning off” €3.2 million in commission that it was not supposed to take.

The company was employed by the NTMA to help with the disposal of €4.7 billion held by the National Pension Reserve Fund which was liquidated to recapitalise the banks.

Appearing before the Public Accounts Committee today, Corrigan said State Street were employed on an agency basis which he said means they should have handed all proceeds from a sale transaction back to the client.

However in this case Corrigan said there was 0.7 per cent “clipped off” the sale prices meaning that from every €100, only €99.93 made it back to the pension reserve fund with the commission totalling over €3 million.

“Fraudulent”

“What happened here was fraudulent and is totally unacceptable”, Corrigan said.

He said State Street have “refunded the amount that was improperly taken” but said “as far as we are concerned the matter is not closed”.

Corrigan said the agency has reserved its position pending a review by the Financial Services Authority (FSA) in England and it has written to the FSA to formally establish its interest in their investigations.

He said the key issue is whether this was a relatively isolated incident and how high up the corporate structure it went.

It is understood that three people have exited State Street on the back of this and Corrigan said he was led by the global vice chairperson of State Street to understand that “these improper reductions did not go further up the corporate chain”.

In a statement today, State Street said that as a result of its own analysis it “determined that certain employees failed to comply with the high standards of conduct, communication and transparency that we expect.” It said those individuals are no longer with the company.

“We took swift and appropriate disciplinary actions in response to this conduct”, the statement said.

Wider relationship with State Street

Despite the actions of State Street, the company still provides an index service and manages a share portfolio of €900 million for the state. However Corrigan said the wider relationship is also at risk pending the outcome of the FSA investigation.

Labour TD Derek Nolan said there has been no action taken against State Street and that the NTMA should rethinking the relationship that the state has with State Street. “This kind of practice can’t go simply by,” he said. “There has to be some kind of consequence.”

An Garda Síochana have been informed of what happened and their inquiries are awaiting further instruction from the NTMA when the FSA report comes out.