SEC Settles Pay-to-Play Scheme With State Street Bank

By Chris Lange Updated Jan 13, 2:59PM EST · Published Jan 15, 10:55AM EST

SEC Settles Pay-to-Play Scheme With State Street Bank — © Thinkstock

The U.S. Securities and Exchange Commission (SEC) announced that State Street Bank and Trust has agreed to pay $12 million to settle charges in regards that it conducted a pay-to-play scheme through its then-senior vice president and a hired lobbyist. This was in an effort to win contracts to service Ohio pension funds.

The SEC investigation found that Vincent DeBaggis, who headed State Street Corp.’s (NYSE: STT) public funds group responsible for serving as custodians or sub-custodians to public retirement funds, entered into an agreement with Ohio’s then-deputy treasurer to make illicit cash payments and political campaign contributions. In exchange, State Street received three lucrative sub-custodian contracts to safeguard certain funds’ investment assets and effect the settlement of their securities transactions.

Andrew J. Ceresney, director of the SEC’s Enforcement Division, commented:

Pension fund contracts cannot be obtained on the basis of illicit political contributions and improper payoffs. DeBaggis corruptly influenced the steering of pension fund custody contracts to State Street through bribes and campaign donations.

DeBaggis agreed to settle the SEC’s charges by paying $174,202.81 in disgorgement and prejudgment interest and a $100,000 penalty.
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The agency further alleges that Robert Crowe, a law firm partner who worked as a fundraiser and lobbyist for State Street, participated in the scheme and entered into undisclosed arrangements with the then-deputy treasurer to make secret illegal campaign contributions to obtain and retain business awarded to State Street.

David Glockner, director of the SEC’s Chicago Regional Office, said:

Our complaint alleges that Crowe served as a conduit for corrupt payments from State Street to influence decisions about public pension fund service contracts. Pay-to-play schemes are intolerable, and lobbyists and their clients should understand that the SEC will be aggressive in holding participants accountable.

The $12 million that State Street agreed to pay in the settlement includes $4 million in disgorgement and prejudgment interest and an $8 million penalty.

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About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.