By Nate Raymond
BOSTON, June 26 (Reuters) - A former State Street Corp executive was convicted on Tuesday of participating in a scheme to defraud several of the bank's customers by charging them secret commissions on billions of dollars of trades.
A federal jury in Boston found Ross McLellan, 46, guilty on five of six counts the one-time State Street executive vice president faced, including conspiracy, securities fraud and wire fraud.
The verdict came on the second day of jury deliberations and followed a trial of about three weeks. U.S. District Judge Leo Sorokin scheduled McLellan's sentencing for Oct. 10.
"We're disappointed in the verdict and optimistic in an appeal that will include an enormous amount of significant issues, some of which are virtually unprecedented," said Martin Weinberg, McLellan's lawyer.
McLellan is one four ex-employees of the Boston-based bank who since 2016 have faced U.S. charges that they engaged in schemes to overcharge institutional clients, allowing State Street to earn millions of dollars.
Two of those former executives - Edward Pennings and Richard Boomgaardt - pleaded guilty in 2017. Both agreed to cooperate with prosecutors and testified against McLellan in hopes of leniency when they are sentenced.
The case followed a 2014 settlement between State Street and the UK Financial Conduct Authority in which the bank paid a fine of 22.9 million pounds, or $38 million at the time, for charging six customers mark-ups on certain transactions.
In 2017, State Street agreed to pay $64.6 million to resolve related U.S. criminal and civil investigations and entered a deferred prosecution agreement.
According to prosecutors, from 2010 to 2011 McLellan, Pennings, Boomgaardt and others conspired to add the secret commissions for trades made for the six customers, which had been utilizing the bank's "transition management" business.
The service helps large institutional clients like pension funds move their investments between and among asset managers or liquidate large investment portfolios with the objective of minimizing the costs of transitioning the investments.
The six customers included the Kuwait Investment Authority, one of the world's biggest sovereign wealth funds, and Irish, British and Dutch pension funds.
Prosecutors also claimed McLellan defrauded a New York-based unit of insurance company AXA SA by applying hidden fees to trades conducted on its behalf. Jurors acquitted McLellan on the wire fraud charge related to that allegation.
Charges remain pending against a former State Street employee, Kevin Walker, accused of participating in the AXA fraud scheme with McLellan. (Reporting by Nate Raymond in Boston; Editing by Steve Orlofsky and Marguerita Choy)