A custodian bank will pay $12 million to settle charges that it participated in a pay-to-play scheme to win public pension fund contracts.

Boston-based State Street Bank and Trust Company settled U.S. Securities and Exchange Commission charges that it conducted a pay-to-play scheme through a senior vice president and hired a lobbyist to win contracts to service Ohio pension funds.

In an order settling an administrative proceeding, the SEC alleges that Vincent DeBaggis, formerly head of State Street’s public funds group which serves as custodians or sub-custodians to public retirement funds, entered into an agreement with Ohio’s then-deputy treasurer, Amer Ahmad, to make illicit cash payments and political campaign contributions. In exchange, the company received three sub-custodian contracts to safeguard certain funds’ assets and to settle their securities transactions.

State Street will pay $4 million in disgorgement and interest, and another $8 million in civil penalties.

DeBaggis agreed to pay more than $174,000 in disgorgement and prejudgement interest, and a $100,000 penalty, to settle charges against him.

DeBaggis allegedly caused State Street to enter into a lobbying agreement with an immigration attorney named Mohamed Noure Alo, who had no lobbying experience but had connections to Ahmad. The SEC alleged that the purported agreement was devised to funnel money from Alo to Ahmad in exchange for Ohio pension fund contracts.

Involved were four major state pension funds: The $90 billon Ohio Public Employees Retirement System, the $75 billion Ohio State Teachers’ Retirement System, the $14 billion Ohio Police and Fire Pension Fund and the $12 billion Ohio School Employees Retirement System.

According to the SEC complaint, State Street paid Alo $160,000 in lobbying fees from February 2010 to April 2011, and a substantial portion of that was routed to Ahmad. DeBaggis allegedly understood that Alo was acting on Ahmad’s instructions and that the lobbying fee would be shared with the deputy treasurer.

In a complaint filed in U.S. District Court for the Southern District of Ohio, the SEC also alleges that Robert Crowe, a former law firm partner who worked as a fundraiser and lobbyist for State Street, participated in the scheme and entered into undisclosed agreements with Ahmad to make secret illegal campaign contributions to obtain and retain business awarded to State Street.

Together, DeBaggis and Crowe allegedly arranged for at least $60,000 in political contributions to be contributed to the Ohio treasurer’s election campaign in return for Ahmad awarding State Street the sub-custodian contracts. The SEC alleges that Crowe illegally filtered $16,000 through his personal bank account to meet Ahmad’s demands for campaign contrinutions and reimburse individuals for contributions made in their own names.

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