- The Washington Times - Wednesday, May 2, 2012

A Fairfax County judge this week dismissed a nearly $1 billion lawsuit filed last year by Virginia Attorney General Kenneth T. Cuccinelli II alleging the Bank of New York Mellon defrauded state and local pensions in Virginia of more than $40 million.

Mr. Cuccinelli filed the lawsuit in Fairfax County Circuit Court last August on behalf of the Virginia Retirement System, as well as the pension funds in Fairfax and Arlington counties.

The lawsuit argued that BNY Mellon profited by falsifying prices for more than 73,000 foreign-exchange trades.

Claiming violations of the Virginia Fraud Against Taxpayers Act, Mr. Cuccinelli had sought at least $120 million plus interest — three times the state’s actual damages, estimated at more than $40 million. He also sought civil penalties of at least $812 million — $11,000 for each of the 73,784 trades the suit claims were falsely reported.


But Judge R. Terrence Ney dismissed the lawsuit, saying the Fraud Against Taxpayers Act could not be used to seek damages in the case. If the bank actually did what was alleged — namely, falsify its foreign exchange trades — that could provide for other causes of action, such as a breach of its contract or fraud against the funds, he wrote. But an alleged violation of the act must also be accompanied by a claim for payment, he added.

“The Court cannot rewrite the VFATA in order to have it comport with what the Court believed the Act may be trying to address,” he wrote.

Brian Gottstein, a spokesman for Mr. Cuccinelli, said the attorney general was disappointed but added that his office was still reviewing the court’s order and its next options.

“It is important to remember that the court’s ruling does not absolve the bank of wrongdoing,” Mr. Gottstein said. “In fact, for the purposes of its analysis, the court assumes fraudulent behavior by the bank, but finds that the Virginia statutes are written in such a way as to prevent that fraud from being punished under the Fraud Against Taxpayers Act.”

BNY Mellon spokesman Kevin Heine saw it differently.

“We’re pleased that the Virginia court dismissed the entire case against us, vindicating our position that the claims were without merit,” he said. “This decision and the recent dismissal of similar whistleblower claims in California underscore our long-held belief that these cases will not withstand legal scrutiny.”

Mr. Cuccinelli could still seek leave to file an amended complaint in circuit court, but any appeal on the ruling would be to the state Supreme Court, Mr. Gottstein said.

The original complaint against BNY Mellon was filed by a whistleblower in 2009. Virginia subsequently intervened as a plaintiff and filed its complaint in the case in August 2011.

Mr. Cuccinelli claimed that in addition to manipulating certain foreign exchange transactions, BNY Mellon also hid the deception from its customers.