(August 12, 2011) — Florida has filed a lawsuit against BNY Mellon over allegations of overcharging the Florida Retirement System Trust Fund, which had roughly $128.9 billion in assets at the end of June.

The bank was the master custodian of the state’s pension fund and is involved in a majority of transactions regarding the fund.

The lawsuit alleged that rather than pricing trades at the current exchange rates, BNY Mellon added hidden spreads, including markups and markdowns, to foreign exchange trades. As a result, the retirement fund — which is managed by the Florida State Board of Administration — overpaid for foreign purchases, receiving less than the full proceeds of foreign sales.

While not specifying the amount, Pam Bondi, the state’s attorney general, said in a statement that BNY Mellon’s actions cost the state millions of dollars.

“Every penny that state and local employees entrust to Florida’s pension fund is hard-earned, and we will not allow Floridians’ money to be lost due to fraudulent activity,” Bondi said in a prepared statement. “Overcharging for foreign exchange transactions is essentially stealing, and any company that does so will be held accountable.”

Custody banks are coming under increasing scrutiny from public pension funds over possible FX overcharges. In June, for example, Massachusetts State Treasurer Steven Grossman said that BNY Mellon allegedly overcharged Massachusetts Pension Reserves Investment Management (MassPRIM) more than $30 million on foreign exchange (FX) trading since 2000.

BNY Mellon denied the accusations. “We reject the notion that [MassPRIM] was ‘overcharged,’” the bank said in a statement. “We value our client relationships and are confident that we offer our clients and their investment managers competitive and attractive FX pricing.”