Carmen Segarra
By Elaine Magliaro
Last week, I read ProPublica’s story about Carmen Segarra, a bank examiner and whistle-blower who made secret recordings while she was working at the New York FED. Segarra had been hired by the FED in late 2011 “as part of a group of examiners brought on to monitor 
systemically important banks in the aftermath of the Dodd-Frank regulatory overhaul. The Fed wanted experts in key areas — such as operations, compliance and credit risk — to examine the ‘Too Big To Fail’ financial institutions.” Just seven months after being hired by the NY FED, however, Segarra was fired.
Following her firing, Segarra filed a wrongful termination suit. She sued the New York FED and her bosses. She claimed that “she was retaliated against for refusing to back down from a negative finding about Goldman Sachs.” Segarra had discovered that Goldman Sachs “lacked an adequate company-wide policy to manage conflicts of interest…” She said she was fired “after her superiors urged her to change this finding and she refused.”
In the spring of 2012, a senior examiner with the Federal Reserve Bank of New York determined that Goldman Sachs had a problem.
Under a Fed mandate, the investment banking behemoth was expected to have a company-wide policy to address conflicts of interest in how its phalanxes of dealmakers handled clients. Although Goldman had a patchwork of policies, the examiner concluded that they fell short of the Fed’s requirements.
That finding by the examiner, Carmen Segarra, potentially had serious implications for Goldman, which was already under fire for advising clients on both sides of several multibillion-dollar deals and allegedly putting the bank’s own interests above those of its customers. It could have led to closer scrutiny of Goldman by regulators or changes to its business practices.
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 Fed denied any wrongdoing in the case, as did Goldman Sachs, which was not a defendant in Segarra’s lawsuit.
Dealbook reported in April of this year that a judge had dismissed Segarra’s lawsuit. In her ruling, Judge Ronnie Abrams said that the former bank examiner had “failed to prove that her firing was directly related to her finding that the bank had exhibited certain questionable ethics practices, including a lack of internal conflict-of-interest policies.”
Judge Abrams wrote, “The law only protects those who adequately allege that they have suffered retaliation for providing information regarding a possible violation of a ‘law or regulation,’ as distinct from what the law treats as advisory guidance. Plaintiff has not done so here.”
ProPublica reported that Segarra’s lawyer had disclosed “a stunning fact” at the bottom of a document that had been filed in the case: “Segarra had made a series of audio recordings while at the New York Fed. Worried about what she was witnessing, Segarra wanted a record in case events were disputed. So she had purchased a tiny recorder at the Spy Store and began capturing what took place at Goldman and with her bosses.”
Segarra recorded more than forty hours “of meetings and conversations with her colleagues. Many of these events document key moments leading to her firing.” ProPublica said that the recordings “offer an intimate study of the New York Fed’s culture at a pivotal moment in its effort to become a more forceful financial supervisor”—and “portray a New York Fed that is at times reluctant to push hard against Goldman and struggling to define its authority while integrating Segarra and a new corps of expert examiners into a reorganized supervisory scheme.”
In a statement that she made last Thursday, Senator Elizabeth Warren of Massachusetts said, “The tapes reveal a basic cultural issue: The Fed can identify problems, but can’t bring itself to make the banks fix those problems. We need congressional hearings to dig into what’s gone wrong at the Fed, and we need to do it now because our whole economy is riding on the Fed’s ability to supervise the biggest banks.”
In his Bloomberg View article titled The Secret Goldman Sachs Tapes, Michael Lewis provides readers with “the gist” of what the recordings show evidence of: “The Fed failed to regulate the banks because it did not encourage its employees to ask questions, to speak their minds or to point out problems.” He said the Fed actually “encourages its employees to keep their heads down, to obey their managers and to appease the banks. That is, bank regulators failed to do their jobs properly not because they lacked the tools but because they were discouraged from using them.”
NOTE: This American Life worked with investigative news organization ProPublica to make Carmen Segarra’s Fed recordings public. Here are links to those radio programs:
536: The Secret Recordings of Carmen Segarra (Main Page)
ANOTHER NOTE: The Main Page of 536: The Secret Recordings of Carmen Segarra provides summaries of the different episodes of the Segarra story that I linked to above.
SOURCES
536: The Secret Recordings of Carmen Segarra (This American Life)
Inside the New York Fed: Secret Recordings and a Culture Clash
A confidential report and a fired examiner’s hidden recorder penetrate the cloistered world of Wall Street’s top regulator — and its history of deference to banks. (ProPublica)
NY Fed Fired Examiner Who Took on Goldman (ProPublica)
So Who is Carmen Segarra? A Fed Whistleblower Q&A (ProPublica)
Secret Goldman Sachs Tapes Put Pressure on New York Fed (Dealbook/NY Times)
Judge Dismisses Former Bank Examiner’s Suit Against New York Fed (Dealbook/NY Times)
The Secret Goldman Sachs Tapes (Bloomberg View)
Nicole Plyler Fisk
Gene Howington
FFS Guest Blogger
Joy of Fishes
Chuck Stanley
shortfinals
Terry Welshans
ann li-summers
wordcloud9
Flowers For Socrates 
Simple solution. FIRE ALL the NY FED managers and hire her as the head of the NY Fed. If Obama cannot or will not do so, then Congress or the Senate can do so.
Say what WE want or you’re no longer welcome here…. Seems like an epidemic in many areas…
A rare find, a bank regulator with integrity. Let’s hope she survives. We need her.
I want Segarra on my team.
Someone needs to look very closely at Judge Abrams, an Obama appointee and really, really well connected through her family, who ruled Segarra did not qualify for protection as a “whistleblower”
“…when she disclosed that Goldman Sachs was not in compliance with SR 08-08. This “finding” may well have been important, but it did not fall into one of the categories that Congress determined was entitled to protection. Under the facts alleged in the FAC, Plaintiff is thus not a “whistleblower” within the meaning of § 1831j.”
I feel for Carmen Segarra and know all too well about her dilemma, in being a federal whistleblower – both in and out of courts.
Reported on Segarra’s story when it first broke (as there was also a case of Goldman Sachs hiring a firm to shut down the website GoldmanSachs666.com); and I’m amazed that it was Propublica that brought the case back to the fore.
Glad they did and hope Senator Warren gets Washington D.C. hearings on the nolle prosequi culture protecting Goldman Sachs, within our federal systems of justice.
I feel for Carmen Segarra and know all too well about her dilemma, in being a federal whistleblower – both in and out of courts.
Randy says:
“Simple solution. FIRE ALL the NY FED managers and hire her as the head of the NY Fed. If Obama cannot or will not do so, then Congress or the Senate can do so.”
Actually, the feds are not saying anything that every other component of the structure that is supposed to regulate the banking industry isn’t saying under their breath, and whatever Segarra is saying is known by every single person in this country.
If the president and the attorney general won’t hit them too hard for fear of upsetting the economy, and our elected officials (including Elizabeth Warren) are dependent on their money to win their seat, that we are surprised at all is surprising to me.
po;
Nothing surprises me any more. Ineptitude and willful blindness are the rule, rather than the exception. In our case against Goldman Sachs, we are armed with their attorneys confessions to lies under oath (to a Chief fed justice) more than 15 times; but no fed agent/agency cares to know facts against Goldman Sachs.
That is, of course, unless your a Sachs law firm partner who becomes THE U.S. Attorney.
(see the DOJ’s Office of Legal Policy archived Resume of Colm Connolly).
Wall Street on Parade website has a story of other persons who have pointed out lack of due diligence and breach of fiduciary duty by fed agents/agencies. One such person is a recent retiree of the SEC, James A. Kidney. It was pointed out that SEC personnel see no career advance opportunities, other than “punching” their ticket to get a law firm cushy job. (Such as President Corp. Fraud Task Force U.S. Attorney Debra Yang did, along with former USAG Ashcroft sharing a $50 million NO Bid “Deferred Prosecution Agreement” granted to them by then U.S. Attorney Chris Christie – who punched his ticket by doing so – to the Governor’s chair).
http://wallstreetonparade.com/2014/10/four-other-lawyer-whistleblowers-are-essential-at-the-carmen-segarra-senate-witness-table/
Do you remember what it used to be called, in the better days of ethic behavior, if an Attorney General would take millions in payments to avoid prosecuting a target of fed investigation?
Democrats Lean Heavily on PACs .
By ASHLEY PARKER and NICHOLAS CONFESSORE
Oct 5, 2014
Democrats are more reliant than they have ever been on the very kind of big-money groups they have spent years trying to outlaw.
Copyright 2014 | The New York Times Company
“Oh what a tangled web we weave, When first we practice to deceive”
— Sir Walter Scott
buckaroo sez: “Democrats Lean Heavily on PACs .”
To which I respond: So !!??
Today, not leaning heavily on PACS is like bringing a knife to a gunfight. False equivalency is simply……false equivalency.
I concur Mike;
Difference between battles having a chance of winning or being beaten;
is equal air time.
In the absence of truth; Bull [c]hit sells well….
Otteray;
I fixed the glitch, not by my gravatar;
but via switching link (only to this Blog) to my WordPress link
Click to access catosletterv12n4.pdf
“TARP contributed to an unnecessary
panic in the marketplace and required
an unprecedented $29 trillion
dollars of market intervention
by the Federal Reserve and the
Treasury, over twice the annual
GDP of the United States, to restore
the very markets that they
themselves helped to collapse. It
precipitated a dramatic drop in the
stock market, froze trading and the
capital markets, magnified and extended
the market collapse, damaged
the reputations of many financial
institutions who did no
wrong, increased moral hazard, institutionalized
“too big to fail,” and
outraged the general public. Because
of TARP and the anger it fomented,
Congress had an excuse to burden the
financial industry with the largest increase
in bank regulations in history.
As Will Rogers used to say, “If stupidity
got us into this mess, why can’t
stupidity get us out?” Congress remembered
what Will said and enacted
the Dodd-Frank legislation.”
Pingback: My Second Post about Former Bank Examiner Carmen Segarra Who Was Fired by New York Fed for Doing Her Job | Flowers For Socrates
Pingback: UPDATE—In the Case of Carmen Segarra and the Secret NY Fed Recordings: A Senate Hearing Is Set to Explore the Case of the Fired Bank Examiner and Investigate Whether Regulators May Be “Too Cozy Toward the Industry They Are Meant to Police” | Flowers
Pingback: UPDATE—In the Case of Carmen Segarra and the Secret NY Fed Recordings: A Senate Hearing Is Set to Explore the Case of the Fired Bank Examiner and Investigate Whether Regulators May Be “Too Cozy Toward the Industry They Are Meant to Police” | Flowers
Pingback: UPDATE—In the Case of Carmen Segarra and the Secret NY Fed Recordings: A Senate Hearing Is Set to Explore the Case of the Fired Bank Examiner and Investigate Whether Regulators May Be “Too Cozy Toward the Industry They Are Meant to Police” | Flowers