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Whistleblower Validated in Goldman Sachs-New York Fed Corruption Case

Has the blatancy of revolving door corruption between Wall Street and regulators finally peaked? If it has, it is likely due to a whistleblower who once worked at the New York Fed.

On Monday, The New York Times reported that a former employee of Goldman Sachs and a former employee of the New York Federal Reserve will plead guilty to criminal charges related to their involvement in the leaking of privileged documents from the New York Federal Reserve to Goldman Sachs.

In an episode of brazen corruption, a former New York Fed employee turned Goldman Sachs associate, named Rohit Bansal, was given privileged New York Fed documents on a bank he was advising by a then-current New York Fed employee, named Jason Gross — a clear cut example of collusion between a financial regulator and Goldman Sachs.

William C. Dudley, a former Chief Economist at Goldman Sachs, led the New York Federal Reserve at the time of the crime and is still in charge there today. Alumni of Goldman Sachs have infested a host of financial regulatory agencies from the Treasury Department, SEC, CFTC, the Federal Reserve system and beyond. The prevalence of former Goldman Sachs employees in financial regulatory roles has led to the Wall Street firm being nicknamed “Government Sachs.”

An interesting tidbit within The Times’ story is that the reason such seemingly common conduct at the New York Fed became a criminal case may have been due to the actions of New York Fed whistleblower Carmen Segarra.

Segarra served as a bank examiner at the New York Fed tasked with overseeing Goldman Sachs. After seeing unethical and possibly illegal conduct, she made audio recordings of apparent collusion between the New York Fed and Goldman Sachs. In The Times’ story, it appears as though Segarra’s accusations and recordings caused a sudden change in attitude within Goldman on Bansal’s activities:

In one conference call with colleagues in early September 2014, Mr. Bansal shared insights about the midsize bank in New York, the lawyers said. At other points, he emailed Fed material to Mr. Jiampietro. Despite the warning signs, no one flagged the information for Goldman’s compliance department.

It was not until Sept. 26, the same day news reports emerged about Ms. Segarra’s taping conversations with her supervisors about Goldman, that Goldman executives objected to some of Mr. Bansal’s information, the lawyers briefed on the matter said. In a conference call with Scott Romanoff, a partner at Goldman and a well-known Wall Street executive, Mr. Bansal circulated a spreadsheet that contained some seemingly delicate details.

Ironically, it was Segarra’s scrutiny of Goldman Sachs’ conflicts-of-interest policies (or lack thereof) that may have gotten her fired from the New York Fed. After she was fired, Segarra did file a lawsuit claiming her termination violated whistleblower protections, but the suit was ultimately dismissed.

It remains more obvious than ever that the regulators and Wall Street are two parts of the same problem. We need whistleblowers in the regulatory agencies just as much as in the Wall Street banks to prevent another crash.

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Dan Wright

Dan Wright

Daniel Wright is a longtime blogger and currently writes for Shadowproof. He lives in New Jersey, by choice.