Journalism in the Public Interest

N.Y. Fed Asks Court to Dismiss Fired Goldman Examiner’s Lawsuit

Responding in a wrongful termination case, the New York Federal Reserve disputes Carmen Segarra’s claim that Goldman Sachs lacked firm-wide conflict-of-interest policies.

Responding in a wrongful termination case, the New York Federal Reserve disputes Carmen Segarra’s claim that Goldman Sachs lacked firm-wide conflict-of-interest policies. (Nabil Rahman for ProPublica)

The Federal Reserve Bank of New York has asked a judge to throw out a lawsuit by a former bank examiner who says she was dismissed after finding fault with Goldman Sachs’ conflict-of-interest policies.

ProPublica reported the allegations last month by Carmen Segarra, who the New York Fed had assigned to examine aspects of Goldman Sachs in November 2011. She was fired seven months later.

In its motion to dismiss Segarra’s lawsuit, the Fed disputed that she is a whistleblower and characterized what transpired as “a non-actionable disagreement between a supervised employee and more senior colleagues over how to interpret a Federal Reserve policy.”

Segarra had been hired as part of an effort by the New York Federal Reserve to comply with new authority it received from Congress to monitor so-called Too-Big-to-Fail financial institutions. The Fed recruited experts to act as “risk specialists” to examine different aspects of these complex firms.

Segarra, who previously had worked in some of the nation’s largest banks, was tasked with examining legal and compliance functions at Goldman. Her supervisors told her specifically to look at whether Goldman was compliant with Fed guidance that the bank had a firm-wide conflict of interest policy, according to her Oct. 10 complaint.

At the time, Goldman had been buffeted by allegations in media reports and lawsuits over how it handled conflicts of interest. Segarra determined that Goldman did not have such a firm-wide policy. Although her fellow legal and compliance specialists working at the other banks agreed with her findings, however, the Fed’s senior official onsite at Goldman, Michael Silva, ultimately did not, according to her complaint.

Silva and his deputy, Michael Koh, tried to convince Segarra to change her findings, the lawsuit says. Three business days after sending an email to them explaining that the evidence she had gathered made it impossible for her to change her conclusions, Silva fired her. Before being escorted from the building, Silva told her he had lost confidence in her ability to follow directions and not to jump to conclusions, Segarra says.

Segarra’s suit in U.S. District Court names as defendants the New York Fed, Silva, Koh and her direct supervisor, Johnathan Kim. She alleged wrongful termination, breach of employment contract and that the defendants interfered with protected conduct she was exercising as a bank examiner.

Segarra’s lawsuit cites a federal law that allows bank examiners to sue for wrongful termination if they are fired for providing information regarding “any possible violation of any law or regulation, gross mismanagement, a gross waste of funds, an abuse of authority, or a substantial and specific danger to public health or safety.”

In its motion to dismiss, the New York Fed said that Segarra worked “at will” and so there could be no “breach of contract.” It also said that she was fired for cause and that the guidance she was told to use to examine Goldman was advisory and not a regulation, so the bank could therefore not be in violation. It further argued that since some of the information Segarra used to make her determination came from Goldman, she technically did not “provide” it to the Fed.

In its filing, the Fed cited a Code of Conduct policy and a 2011 Business Standards Committee Report as evidence that Goldman had a firm-wide policy governing conflicts of interest policy. Goldman, which is not a defendant in Segarra’s lawsuit, has said that it has such a policy.

“She rushed to judgments that even her own evidence refuted,” the New York Fed’s motion said.

The 2011 Business Standards Committee Report the Fed cited mentions plans to update and provide to all employees a conflict–of-interest policy but does not detail policies or procedures. As for it its code of conduct, Segarra told ProPublica that Goldman itself did not believe it constituted a conflict of interest policy since it did not provide it to regulators as such.

“My direct management and some of my peers did not think Goldman's Code of Conduct was a conflicts-of-interest policy,” she told ProPublica in an interview. “Policies in banks are actually pretty standardized documents, with clear titles and content directly related to the title/purpose of the document, written in a language meant to be understood by every employee at every level.”

Segarra’s attorney, Linda Stengel, disputed the Fed’s contention that her client is not a whistleblower.  “Obviously, Carmen is a whistleblower, and obviously, her work as a bank examiner is protected conduct,” said Stengle. “Those conclusions are simple common sense to most everyone, except FRBNY, apparently.”

Segarra’s complaint asked for reinstatement, back pay, compensation for lost benefits and damages.  The Fed’s motion rejected reinstatement or damages, contending that Segarra “misappropriated and published confidential supervisory information” as exhibits in her lawsuit.

One has to wonder if this may be a case Ms. Segerra getting too close to what was happening in the seemingly too cozy relationship that the big banks/financial agencies enjoy with the Fed, who are, in part, supposed to regulate them?  In the meltdown of 2008-2009, there was obviously wrong doing, but no one paid.  The Dimond fellow walked away with a HUGE bonus!

Steve Satterwhite

Nov. 15, 2013, 8:14 p.m.

Good to see some new work by Jake Bernstein.


Nov. 15, 2013, 8:22 p.m.

She gets bum-rushed when, as tasked, she reports that Goldman-Sachs’ PLANNED plan regarding conflicts of interest is not a plan. 

Seems pretty straightforward, no?  A planned plan is just not a plan.

This from the same firm that at the implosion of the MBS debacle were making opposite bets on the same steaming piles of AAA dog shit on different trading floors IN THE SAME BUILDING! 

Chinese wall, my ass!  And the senior Fed official who bum-rushes Ms Sagarra sits where?  Why, Mr Silva is on-site, where?  Why, Mr. Silva is on-site at the Goldman-Sachs building. 

Given the inbreeding between FRBNY and Goldman at the highest levels I would say that a finding in favor of Ms. Sagarra will be a shot across the bow of the Goldman-Sachs pirate ship, but I wouldn’t hold my breath, because Casino Wall Street is rigged and this fish stinks at the head.


Nov. 15, 2013, 8:26 p.m.

While I hope Ms. Sagarra’s position prevails, I will not be holding my breath even though a PLANNED plan is clearly not a plan.

Casino Wall Street is rigged and this fish stinks at the head.

Shake the kivvers out real violent like, and when them bugs hit the floor, stomp ‘em good two or four times!

Good Luck Ms. Sagarra.

It strikes me as interesting that the new policy in every field, today, is to prevent people from talking about real issues.

Why would the Fed be involved, here?  Because they think the very discussion is dangerous to what they do.

Did anybody see the article last week that Wall Street is terrified of Elizabeth Warren running for President?  They’re not afraid of her winning.  They’re just afraid that she’ll get involved in the primaries.  With her on the “left” and a Rand Paul on the “right,” the other candidates might be forced to talk about Wall Street policy in public.

Think about that, and think about how aggressive Washington has been in trying to stop whistle-blowers.  Segarra has her work cut out for her, and I wish her luck, for all our sakes.


Nov. 18, 2013, 8:04 p.m.

Let’s see.  When Sanford Weill headed Traveler’s and Jamie Dimon was his light-duty kid, his acquisition of Citi only made sense if Glass-Steagall went away.  Guess the deal was done (on many important fronts) because they closed their deal month’s prior to Congress closing down Glass-Steagall. 

Look.  The only real reason I’m pissed is that I didn’t get that interview with Goldman back in the early eighties -I think their offices were on Gold Street- and I didn’t put away enough for a place on St. Bart’s; nonetheless, outta pique or not, the only real answer is to elect Elizabeth Warren and to bring back Glass-Steagall (only call it something different like “The Stop Wall St. From Fucking US Law”)

lee mulcahy phd

Nov. 19, 2013, 11:46 p.m.

Oh please.  That lying crook Tim Geitner used to run the NY Fed. 

The sooner America wakes up to these corrupt greedy criminals that run our financial institutions,  the better.

My prayers are with Ms Segarra.  God speed.

I’m not a gambler, but would wager that the courts will protect the Feds as they do the NSA.  Hope I lose and that Ms. Segarra prevails as more than a Don Quixote.  She deserves the respect of all Americans who believe in basic human decency.

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