HSBC Charged $7 Million for Defrauding Retirement Fund in Violation of California False Claims Act

Last month, California Attorney General Xavier Becerra announced a $7 million settlement involving multinational financial services company HSBC. According to a press release from Becerra’s office, the settlement resolves allegations that HSBC overcharged the California Public Employees Retirement System (CalPERS) in foreign currency trading, a violation of the California False Claims Act.

In 2008 and 2009, HSBC charged unusually high amounts to CalPERS using Euro and British pound transactions. A California Department of Justice investigation proved that this pattern of fraud led to millions in losses to the pension fund, which serves as retirement for many state employees.

A qui tam whistleblower was the key to uncovering the frauds committed in this case. This whistleblower alleged that between 2006 and 2011, HSBC charged CalPERS with higher or lower exchange rates when carrying out foreign currency trades.

“Once again, whistleblowers have proven to be effective deterrents of fraud,” said whistleblower attorney Michael D. Kohn, partner at qui tam law firm Kohn, Kohn & Colapinto. “Whistleblowers like this continue to save millions of dollars for taxpayers and federal employees.”

Kohn represents the whistleblower who exposed the fraud that sparked this case.

California is one of several states and cities that have their own False Claims Act. Other than filing requirements, the California False Claims Act is relatively identical to the federal version.

The qui tam, or whistleblower, provisions of the False Claims Act allow for citizens who have firsthand knowledge of frauds to receive whistleblower awards based on the results of their reporting.

In order to qualify for an award, whistleblowers, or relators, must file a formal lawsuit in federal court. The government will then choose whether or not to intervene in the case. If the government does not decide to intervene in the case, the whistleblower has a right to proceed with the qui tam lawsuit.

Read the settlement agreement: Connolly v. HSBC