The California attorney general, Jerry Brown, has sued the State Street Corporation with fraud, claiming that the Boston-based financial giant cheated two public employee pension funds of more than $200 million.

The charges said State Street overcharged the California State Teachers' Retirement System and the California Public Employees' Retirement System with fees plus penalties for handling foreign currency trades.

The suit alleges that the State Street entered fake exchange rates into its trading databases, which automatically withdrew money from funds' accounts.

Hannah Grove, spokesperson for the State Street, said, "We categorically deny any allegations of wrongdoing and will defend ourselves against any litigation."

State Street warned that business could turn slow than projected during the second half of the year.

In the after-hour trading, shares in State Street fell 8.4 per cent to $47.84-a-share.