BOSTON, MASSACHUSETTS – Ross McLellan, 47, of Hingham, a former executive vice president of State Street Corporation, was sentenced to 18 months in prison and two years of supervised release for his role in a scheme to defraud at least six of the bank’s clients through secret commissions applied to billions of dollars of securities trades.
The scheme, which took place between February 2010 and September 2011, involved McLellan, Edward Pennings, and Richard Boomgaardt, all former executives of State Street, conspiring to add secret commissions to fixed income and equity trades performed for the bank’s clients. The commissions were charged on top of fees that the clients had agreed to pay to the bank, and despite written instructions to the bank’s traders that generally reflected that the clients were not to be charged trading commissions.
McLellan, Pennings, and Boomgaardt took steps to hide the commissions from the clients and others within the bank, including by directing that the commissions not be broken out in post-trade reports. In a telephone call in March 2010, Pennings instructed Boomgaardt not to talk about the plans to charge hidden commissions on one transaction “with anyone . . . because it’s not going to help our story. Don’t even share it with the rest of the team, to be honest.”
In June 2010, McLellan and Boomgaardt requested that the bank’s traders provide them with the reported daily high and low prices of securities that the bank had traded for the client so that they could determine the amount of the commissions to be applied to each security without attracting the client’s attention. In March 2011, McLellan instructed a U.S. fixed income trader to charge a commission of one basis point (0.01%) of yield to each trade conducted for another client – notwithstanding that the written trading instructions for the transaction said to charge zero commissions – and subsequently instructed the trader to delete any reference to the commissions from the trading results he sent to the transition manager assigned to the project.
McLellan was convicted by a federal jury of one count of conspiring to commit securities fraud and wire fraud, two counts of securities fraud and two counts of wire fraud. He was sentenced by U.S. District Court Judge Leo T. Sorokin on [No Date Given].
McLellan’s co-conspirators, Edward Pennings and Richard Boomgaardt, also faced charges. Pennings pleaded guilty in June 2017 and was scheduled to be sentenced on November 6, 2018. Boomgaardt pleaded guilty in July 2017 to one count of conspiracy to commit securities fraud and wire fraud and was sentenced to one year of probation in July 2018.
Key Facts
- State: Massachusetts
- Category: Fraud & Financial Crimes
- Source: DOJ Press Release â†â€â€
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