Created on Friday, 20 September 2013 Written by THE ASSOCIATED PRESS
COLUMBUS, Ohio (AP) — Ohio's public pension systems must change which banks handle their $41 billion in combined international investments as the state treasurer tries to separate those investments from banks hired under his predecessor's administration, which is under investigation.
But the changes required by State Treasurer Josh Mandel have drawn complaints from retirement fund officials, who say the switch is disruptive and could cost millions of dollars, The Dayton Daily News (http://bit.ly/16L9jaU ) reported.
The Republican treasurer says the pension systems must entrust their global assets to JP Morgan Chase or CitiBank instead of State Street Bank and Bank of New York Mellon.
The Ohio Public Employees Retirement System, State Teachers Retirement System and Ohio Police & Fire Pension Fund will see their annual costs more than triple to $4.76 million with the switches, the newspaper reported. The School Employees Retirement System expects to see its annual international custodian fees drop by $105,000.
"These are expensive and introduce considerable risk to our system," Karen Carraher, director of the Ohio Public Employees Retirement System, wrote in a March letter to Mandel's chief financial officer.
Mandel spokesman Seth Unger says the moves are meant to protect Ohioans' money amid the investigation of Mandel's predecessor, Democrat Kevin Boyce, and lawsuits against the replaced banks.
The FBI in 2010 began investigating how the custodial contracts were awarded.
Boyce and his deputy treasurer, Amer Ahmad, assigned State Street Bank to handle international assets for three Ohio pension funds, and State Street hired immigration attorney M. Noure Alo as its lobbyist. Ahmad and Alo pleaded not guilty last month to federal charges that they participated in a kickback scheme in the treasurer's office. Those charges aren't related to the custodial contracts.
State Street Bank has faced lawsuits in other states and a Securities and Exchange Commission investigation over allegations that it manipulated foreign currency transaction prices. Bank of New York Mellon has faced lawsuits and complaints in Ohio and other states over similar issues.
Messages seeking comment that were left with the banks Friday were not immediately returned.
Ohio's public pension funds serve 1.8 million people and hold roughly $165 billion in net assets, including $41 billion in international investments.