Last week, the Securities and Exchange Commission (“SEC”) issued a press release announcing a settlement it had reached with State Street Bank and Trust Company for a “pay-to-play” arrangement it had with a former deputy treasurer in Ohio (SEC Press Release). A pay-to-play scheme is achieved when someone affiliated with a bank or investment fund bribes (or otherwise monetarily “incentivizes”) a decision-maker for a government investor to throw lucrative business the way of the bank or investment fund. Of course, as with most illegal activities, the trickiest part of the scheme is not getting caught. Here, the players got caught.
According to the SEC, State Street’s former senior vice president and head of the public funds group at State Street, Vincent DeBaggis, had an agreement with a former deputy treasurer for Ohio, whereby Ohio entered into lucrative investment-related contracts with State Street in exchange for prohibited cash payments and campaign contributions made by DeBaggis on behalf of State Street (State Street Order). State Street has agreed to pay $4 million for disgorgement and prejudgment interest and $8 million as a penalty.
The SEC also reached a settlement with DeBaggis for the same misconduct. For his part, DeBaggis must pay disgorgement of $150,000, plus prejudgment interest of $24,202.81, as well as a penalty of $100,000 (DeBaggis Order). Just last week, the SEC filed a Complaint against lawyer and lobbyist charging him for his involvement in the pay-to-play scheme (Complaint). According to the SEC, the Ohio players from the treasurer’s office were criminally convicted for other misconduct and are in federal prison.