(Adds comment from State Street)
By Nate Raymond
BOSTON, Feb 7 (Reuters) - U.S. prosecutors on Wednesday brought a new charge against a former State Street Corp executive accused of participating in a scheme to defraud clients by charging them secret commissions on billions of dollars of trades.
Ross McLellan, a former executive vice president at the bank, was previously charged in an indictment filed in Boston federal court with participating in a scheme to defraud six clients in Europe and the Middle East.
The indictment filed on Wednesday added a new allegation that McLellan with others sought to defraud an unnamed New York-based insurance company by applying hidden fees to fixed income trades conducted for funds advised by the insurer.
The indictment said that as a result of McLellan's action, State Street overcharged the insurers and the funds it advised by about $700,000.
McLellan has previously pleaded not guilty to securities fraud and wire fraud charges that were first filed in 2016. Martin Weinberg, McLellan's lawyer, said the Massachusetts resident continues to contend he is innocent.
"We fully believe there are compelling legal and factual bases to negate the viability of the new addition to an old indictment," Weinberg said.
Boston-based State Street said it regrets that clients were overcharged and is cooperating with prosecutors.
McLellan, who is scheduled to face trial in June, is one of three former State Street executives to face U.S. charges that they schemed to fleece the bank's clients.
Edward Pennings, a former senior managing director in State Street's London office, and Richard Boomgaardt, who was head of the bank's transition management desk for Europe, the Middle East and Africa, pleaded guilty in 2017.
The case followed a 2014 settlement between State Street and the UK Financial Conduct Authority in which the Boston-based bank paid a fine of 22.9 million pounds, or $38 million at the time, for charging the six clients mark-ups on certain transactions.
State Street in January 2017 agreed to pay $64.6 million to resolve related U.S. criminal and civil investigations.
Prosecutors have alleged McLellan and others from 2010 to 2011 conspired to add the secret commissions for trades performed for six clients of the bank's "transition management" business.
That unit helps institutional clients move their investments between asset managers or liquidate investment portfolios, prosecutors said.
The six clients included a Middle Eastern sovereign wealth fund and Irish and British government pension funds, according to court papers.
The case is U.S. v. McLellan, U.S. District Court, District of Massachusetts, No. 16-cr-10094. (Reporting by Nate Raymond in Boston; editing by Paul Simao and Tom Brown)