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Ex-New York Fed Examiner’s Suit Over Goldman Dismissed

Updated on

April 24 (Bloomberg) -- The Federal Reserve Bank of New York won dismissal of a lawsuit by a former bank examiner who claimed she was fired for refusing to change findings critical of Goldman Sachs Group Inc.

Carmen Segarra sued in October, saying she conducted an examination of Goldman Sachs’s legal and compliance divisions in late 2011 and early 2012 and found they lacked a firm-wide conflict of interest policy. She claimed she was fired in May 2012 after refusing to change her findings.

U.S. District Judge Ronnie Abrams in Manhattan dismissed the case yesterday, ruling that Segarra failed to make a legally sufficient claim under the whistle-blower protections of the Federal Deposit Insurance Act. Those provisions apply to a violation of a law or regulation, while Segarra claimed she was fired for reporting Goldman Sachs’s alleged failure to comply with a 2008 advisory letter by the Fed’s Board of Governors’ Division of Bank Supervision and Regulation, Abrams ruled.

Abrams said she expressed no conclusion about whether Goldman Sachs had complied with the Fed’s advisory letter.

“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,” Abrams wrote. “Plaintiff has not done so here.”

Linda Stengle, Segarra’s lawyer, didn’t immediately respond to voicemail and e-mail messages after regular business hours yesterday seeking comment on the ruling. Andrea Priest, a spokeswoman for the New York Fed, declined to comment on it.

Employee Recourse

“The New York Fed provides multiple venues and layers of recourse for its employees to freely express concerns about the institutions it supervises,” it said in a statement when Segarra filed the case. “Such concerns are treated seriously and investigated appropriately with a high degree of independence.”

Michael DuVally, a spokesman for New York-based Goldman Sachs, declined to comment on the ruling.

“Goldman Sachs has a comprehensive approach to addressing conflicts through firm-wide and divisional policies and infrastructure,” the firm said when Segarra filed her suit.

Noting that the whistle-blower complaint was Segarra’s sole claim under federal law, Abrams also dismissed her state-law claims for deceptive practices, wrongful termination, negligence, conspiracy and breach of contract. Abrams’s ruling doesn’t prevent Segarra from filing those claims in state court.

Relationship Manager

Michael Silva, who was named as a defendant in the lawsuit, was the New York Fed’s relationship manager for Goldman Sachs, according to Segarra. In a meeting, he said the Fed “possessed information about Goldman that could cause Goldman to ‘explode,’” Segarra claimed.

In court filings, Segarra cited e-mails with Silva in which she argued that Goldman Sachs didn’t have a firm-wide policy that met Fed requirements. She also cited exchanges that undercut her complaint, including claims by superiors that her analysis was incorrect and questioning her judgment.

In a letter to Abrams in October, David Gross, counsel and vice president for the New York Fed, said that Segarra demanded $7 million before she filed the lawsuit.

The case is Segarra v. Federal Reserve Bank of New York, 13-cv-07173, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Bob Van Voris in federal court in Manhattan at

To contact the editors responsible for this story: Michael Hytha at Fred Strasser

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