State Street Corporation , the Boston-based global financial services company, will pay a $32.3 million criminal penalty and an additional equal amount to the SEC to resolve the government's investigation into a scheme to defraud at least six of the bank's clients through secret commissions, according to the Department of Justice. The commissions were applied to billions of dollars of fixed income and equity trades for at least six institutional clients and charged in addition to fees the clients had agreed to pay and despite written instructions to the traders not to charge those clients trading commissions. State Street also took steps to hide the commissions from clients and misrepresented its performance to one of these clients in order to conceal a trading loss. The company admitted the allegations and agreed to a deferred prosecution agreement that requires it to employ an independent corporate compliance monitor for three years. State Street has already fully repaid the victims of the scheme. The government had previously charged two former high-ranking State Street executives, former Executive Vice President Ross McLellan and former Senior Managing Director Edward Pennings, with conspiracy, securities fraud and wire fraud in connection with the same scheme. They are scheduled to go to trial in October.
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