In a March 2012 meeting, a group of examiners at the Federal Reserve Bank of New York agreed that Goldman Sachs had inadequate procedures to guard against conflicts of interest — guidelines aimed at stopping firms from putting their pursuit of profit ahead of their clients’ best interests.
The examiners voted to downgrade a confidential rating assigned by the New York Fed that could have spurred costly enforcement actions and other regulatory penalties. It is not known whether the vote materialized in a rating change.
The former examiner who pushed for a downgrade, Carmen Segarra, now contends in a lawsuit filed Thursday that just weeks after the vote, her superiors asked her to change her findings on Goldman and fired her after she refused.
The vote to downgrade, which has not been previously reported, could have been a big blow for Goldman.
“Goldman Sachs does not have a conflicts-of-interest policy, not firmwide, and not for any divisions,” the examiner wrote to Michael Silva, a senior executive at the New York Fed. “I would go so far as to say they have never had a policy on conflicts.”
The bank has been buffeted by accusations that it has put its own interests ahead of its clients, a contention it denies.
In the lawsuit, Segarra contends she was wrongfully terminated in violation of a federal law that affords protections to bank examiners who find wrongdoing in the course of doing their jobs. Silva, who is chief of staff for the executive group at the New York Fed, is among the defendants named in the suit.
Segarra took her concerns to her bosses, who confronted Goldman. She contends Michael Koh, another senior staff member at the New York Fed and a defendant in the lawsuit, told her Goldman admitted to misconduct but then he dismissed her concerns.
In March 2012, Segarra got her chance to voice her concerns to the New York Fed’s legal and compliance risk team. At the meeting, the group, roughly 20 people, agreed that the issues with Goldman’s conflict-of-interest procedures warranted a warning, according to the lawsuit. As a result, the team approved a downgrade of Goldman’s annual rating.
Silva and Koh, she said, told Segarra that they did not find her position “credible.” Segarra said she refused to modify her findings. On May 23, 2012, Segarra was terminated and escorted from the building.