A lawyer for Edward Pennings, formerly of the bank’s transition management unit, said his client was only following standard practices; State Street vigorously disputes the claim, labeling the dismissed employee a “liar.”
(November 27, 2012)—A lawyer for ex-State Street transition
manager Edward Pennings has claimed in an East London Employment Tribunal that
his client was following “accepted business practices” when overcharging
occurred with multiple European pension clients.
Pennings, along with two others, were dismissed from State
Street in 2011 when it was revealed that the Royal
Mail pension plan was overcharged for a transition. The Sainsbury’s and Irish
national pension plans were also overcharged, it was later revealed. State Street charged clients an
undisclosed commission in addition to the agreed-upon management fee, an audit
by the Irish government determined.
“This was an accepted business model, therefore [Pennings]
had to defend the business model and the bank,” Jeffrey Bacon of law firm Littleton Chambers told the
Tribunal. He added that Pennings was in “an impossible position” and that State
Street’s refusal to look at the wider context of his actions was a mistake. “The
wider context was crucial to this case,” he stated.
Bacon accused State Street of mishandling an internal
investigation into Pennings’ conduct, asserting that the bank “took no steps to
go to those people who were involved, including Ross McLellan, to ask them
whether this was an approved business model.” McLellan was Pennings’ superior
in Boston, and was also
dismissed late last year.
State Street Responds
State Street, in the form of Executive Vice President
Richard Lacaille, responded that Pennings was fired for “lying” to the client. Lacaille
was the disciplinary manager overseeing the initial internal hearing regarding
Pennings’ conduct in October 2011. That hearing led to Pennings being dismissed
shortly after.
Pennings “had a business model that he believed he was
basically required to lie to your clients,” Lacaille told the Tribunal. “I
disagreed.” Lacaille also stated that he did not think Pennings’ business model
“did exist as an authorized, legitimate business model” within State Street.
“However, it was the lies that were by far the most
important issue,” Lacaille added. “I spoke to Ed Pennings during his
disciplinary hearing and there was a very clear set of evidence that he lied to
his client.”
Lacaille also mentioned that others seemed to know of
Pennings actions. “Clearly, other people were involved because he [Pennings]
was involved in correspondence with McLellan,” he said. “Ross McLellan was
certainly knowledgeable about the business model.”
Yet fault still lies with Pennings, Lacaille said. “Whether
or not the business model was approved, the dismissal was based on the fact
that he lied,” he said. “I think the idea that he lied to [the client] and
continued, in a way, to conceal it is just not acceptable.”
According to Lacaille, the investigation gave him a “liberal
mandate and I could talk to anyone I needed to” within the bank. In response to
Bacon’s assertions that the bank failed to look at the wider context, Lacaille
asserted: “I wasn’t asked to judge whole swathes of the organization. I was
asked to judge one person.”
When contacted for comment following the day’s hearing, a
State Street representative gave the following statement to aiCIO: “Mr. Pennings’ actions fell
seriously short of the standards and conduct expected of any employee at State
Street and we have zero tolerance for this. We have addressed the issues
directly with the clients that were impacted. We are disappointed that Mr.
Pennings has been unable to take responsibility for his behavior and that he
has chosen this current course of action.”
During the investigation, Pennings’ codename was “Parker.”
Much of the first day of the Tribunal was spent debating
procedural motions and evidence presentation. It is expected to continue for
the rest of the week.
Additional reporting
from London by aiCIO Contributor Lucy
Pawle.