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NY Fed Examiner Files Wrongful Termination Lawsuit

A senior examiner has filed a wrongful termination lawsuit against the Federal Reserve Bank of New York, claiming she was let go after refusing to keep quiet about serious conflicts of interest at Goldman Sachs.

In hours of interviews with ProPublica, Carmen Segarra described her termination after she discovered numerous examples of shady practices within the investing behemoth.

Her lawsuit alleges that Goldman Sachs lacked a company-wide policy on dealing with conflicts of interest and advised clients on both sides of multi-billion dollar deals that served to benefit the bank. Another troubling accusation is that the Goldman Sachs falsified a signature from the New York Fed on a transaction with a Spanish bank.

From the ProPublica article:

Before she could formalize her findings, Segarra said, the senior New York Fed official who oversees Goldman pressured her to change them. When she refused, Segarra said she was called to a meeting where her bosses told her they no longer trusted her judgment. Her phone was confiscated, and security officers marched her out of the Fed’s fortress-like building in lower Manhattan, just 7 months after being hired.

“They wanted me to falsify my findings,” Segarra said in a recent interview, “and when I wouldn’t, they fired me.”

The New York Fed has previously been accused of cozier-than-appropriate relations with Goldman Sachs. The revolving door is in full effect and spinning in both directions: a former Goldman Sachs partner, for example, is the current president of the New York Fed, and a current top exec at Goldman used to work at the New York Fed.

ProPublica tried to get the NY Fed’s side of the story.

In an email, spokesman Jack Gutt said the New York Fed could not respond to detailed questions out of privacy considerations and because supervisory matters  are confidential. Gutt said the Fed provides “multiple venues and layers of recourse for employees to freely express concerns about the institutions it supervises.”

A Goldman Sachs spokesperson was similarly silent when confronted with questions about Segarra’s firing.

Senators Barbara Boxer (D-Calif.), Bernie Sanders (I-Vt.), and Mark Begich (D-Alaska) introduced legislation in May hoping to curb inappropriate influence on regional Federal Reserve Banks. In a press release, Sanders said, “It is time for change at the Fed.  Americans deserve a Federal Reserve that works for them, not just the CEOs on Wall Street.” The bill is now waiting in the Senate Banking Committee and the partner House bill has been referred to the House Financial Services Committee.

The Project On Government Oversight has also previously called attention to this issue. In 2011, we reported on a Government Accountability Office report that raised concern over conflicts of interest at regional Fed banks.

During the debate surround the Dodd-Frank Act of 2010, we supported a proposal that would have prohibited Fed-supervised firms from electing Reserve Bank directors, and also would have prohibited past and present officers, directors, and employees of these firms from serving as directors. Neither made it into the law.

 

By: Avery Kleinman
Beth Daley Impact Fellow, POGO

Avery Kleinman Avery Kleinman is the Beth Daley Impact Fellow for the Project On Government Oversight.

Topics: Financial Sector

Related Content: Conflicts of Interest, Financial Oversight

Authors: Avery Kleinman

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