Multinational bank HSBC has agreed to pay $7 million to settle whistleblower allegations that they overcharged the California Public Employees Retirement System (CalPERS) when trading to or from foreign currency. According to a September 24 press release from the California Attorney General’s office, between 2008 and 2009 HSBC charged higher than normal currency conversion rates when converting to or from the British pound and the Euro. The settlement resolves a whistleblower complaint alleging that HSBC routinely overcharged CalPERS for currency transactions between 2006 and 2011.
The California state government claims that inflating rates of currency exchange violates the California False Claims Act, a law that closely resembles the federal False Claims Act. The California Department of Justice has reported that the fraudulent behavior of HSBC cost CalPERS millions of dollars. CalPERS is a branch of the Californian government that manages the healthcare and retirement of over 1.6 million Californians. Each year the program spends billions of dollars supporting retired state and public employees.
California Attorney General Xavier Becerra said in a statement: “When you retire from public service, every dollar of your pension counts. We’re holding HSBC accountable for cheating California state pensioners out of their money. No doubt $7 million counts a lot.”
The whistleblower in this case is represented by top whistleblower attorney Michael D. Kohn, a partner at the whistleblower law firm Kohn, Kohn & Colapinto. Kohn said that the settlement demonstrates the importance of whistleblowers. “Once again, whistleblowers have proven to be effective deterrents of fraud,” Kohn said.
Under the qui tam provisions of the False Claims Act, citizens can report fraud and receive a reward for doing so, based on the amount of money the government is able to recover. Whistleblowers are eligible to receive 10 to 30% of the total settlement amount as a reward. The False Claims Act empowers whistleblowers to be one of the most powerful tools to combat corporate fraud.
Read the full settlement agreement here.