A London-based bank which allegedly defrauded the Irish taxpayer of €3.2 million is continuing to manage €900 million in State assets, the Public Accounts Committee was told yesterday.

The discovery that State Street had taken unauthorised payments for disposing of €4.7 billion of Irish assets, first revealed in the report of the Comptroller and Auditor General in September, has been referred to An Garda , National Treasury Management Agency chief executive John Corrigan said yesterday.

State Street is also being investigated by the UK’s Financial Service Authority (FSA).

Despite the alleged fraud, State Street continues to manage a €900 million portfolio of shares for the NTMA, Mr Corrigan told the committee.

The National Pension Reserve Fund (NPRF), which is managed by the NTMA, engaged State Street to sell €4.7 billion in assets. The sale was managed through the bank’s transition team.

The assets were sold between February and May last year to help raise €10 billion to put into the two pillar banks Bank of Ireland and AIB. The agreed fee for State Street’s services was €698,000. However, State Street took an extra commission of €2.6 million and a further €600,000 in profits. The original report by the comptroller said the NPRF had been overcharged. However, Mr Corrigan said that what happened amounted to a fraud and there was collusion within the bank. The money has since been paid back and Mr Corrigan said the three individuals involved have left State Street. He had spoken with a vice-president in the bank who told him the alleged fraud “did not go high up the corporate chain”.

But he stressed that State Street had not yet admitted to fraud and the NTMA was reserving its position pending the FSA’s investigation.

Asked about the controversy yesterday, Minister for Finance Michael Noonan said: “I understand that everything that was misappropriated has been repaid so there is no loss to the State, that’s my priority and I will let the NTMA follow up the consequential actions that are desirable.”

In a statement yesterday State Street said the conduct of those involved did not “reflect the high standards of conduct, communications and transparency that State Street expects”. The bank acknowledged they had charged fees “that were not consistent with our contractual agreements”.

Labour TD Derek Nolan said he was alarmed that State Street continued to manage €900 million in Irish assets when they had “ripped off the Irish taxpayer”.

Mr Corrigan said the NTMA’s relationship with State Street was now “at risk” as a result of what happened.