- Goldman agrees to pay $50 Million to settle N.Y. Fed leak
- Case highlights revolving-door relationship at banks
A birthday party at the Peter Luger Steakhouse in Brooklyn provided a lot of useful intelligence for Goldman Sachs Group Inc. new hire Rohit Bansal in September 2014. It also led to his firing and possible prosecution.
Bansal went to the party of his former colleague Jason Gross, then an employee at the Federal Reserve, and allegedly picked up information from him about a midsized New York bank that was a Goldman Sachs client. After the dinner, Bansal e-mailed his boss to give him a heads up on a rating regulators were going to give the bank the next day, according to a regulator. Bansal circulated an internal Fed document three days later to colleagues at Goldman Sachs, unraveling the sometimes cozy relationship between Wall Street and its regulators and putting Goldman Sachs on the hook for a $50 million fine.
When Goldman Sachs’s management learned Bansal got confidential information from the Fed, it fired him along with his boss and started an investigation. The Fed fired Gross, according to two people briefed on the matter. Bansal and Gross are expected to plead guilty as soon as this week to misdemeanor counts brought by the Manhattan U.S. Attorney, a person briefed on the case said.
Scott Morvillo, Bansal’s lawyer, declined to comment. Bruce Barket, an attorney for Gross, didn’t immediately respond to a request for comment on the possible plea.
In addition to the fine, Goldman Sachs accepted a three-year ban on some advisory work in New York as part of a settlement with the state’s financial regulator over the leak. Details of the leak were spelled out in the agreement.
The case has intensified scrutiny of both the so-called revolving door -- employees moving between regulators and banks -- and the specific relationship between Goldman Sachs and the New York Fed. The latter’s president, William C. Dudley, defended its oversight of banks at a Senate hearing in November after a former New York Fed bank examiner, Carmen Segarra, claimed her colleagues were too deferential to Goldman Sachs, where Dudley was chief economist for a decade.
Segarra sued the New York Fed in 2013 claiming she was fired for refusing to change findings about Goldman Sachs’ conflict of interest policy. The case was dismissed by a judge who said Segarra failed to allege enough facts under the whistle-blower protections of the Federal Deposit Insurance Act.
According to Wednesday’s settlement, Bansal was forced to resign from his position at the Fed in March 2014 for taking his work BlackBerry overseas without getting permission, and for falsifying records to make it look like he had obtained authorization.
While he was being recruited at the bank, Bansal met several times with a Goldman Sachs partner, Scott Romanoff, who took him to lunch and dinner, according to the DFS settlement. As he was being wooed by the bank officials, Bansal claimed he left the Fed voluntarily and no information about his dismissal was publicly available, the regulator said.
After he was hired by Goldman in July 2014, Bansal was assigned to a group advising the same mid-sized New York bank that he had been examining during his time at the Fed, according to the agreement. Goldman Sachs assigned him to the team despite receiving a copy of a restriction notice from the New York Fed specifically forbidding Bansal from working on any matters related to the mid-sized bank until early 2015, according to the regulator.
Bansal obtained about 35 documents, on approximately 20 occasions, from his friend at the New York Fed, according to the DFS. Gross would send confidential Fed documents to Bansal’s personal e-mail address, and Bansal forwarded those to his Goldman e-mail account, the regulator said.
Bansal would then circulate some of these Fed documents to senior personnel at Goldman, including Romanoff and a managing director, Joseph Jiampietro, both of whom were identified not by name but by title by the regulator.
On September 26, three days after the dinner at Peter Luger, the Brooklyn steakhouse that doesn’t take credit cards or post its prices on its website, Bansal allegedly circulated another confidential document among the group advising the mid-sized bank. After the call, Romanoff called Bansal and asked where he had gotten the document. Bansal told him it came from the Fed, and Romanoff alerted the compliance department, according to the regulator.
“We have zero tolerance for improper handling of confidential information,” Goldman Sachs said in a statement Monday. Spokesman Michael DuVally on Wednesday referred to Monday’s statement and said Romanoff would have no comment.
“We have reviewed our policies regarding hiring from governmental institutions and have implemented changes to make them appropriately robust.”
The New York Fed said in a statement in November that it has “zero tolerance” for personnel who don’t safeguard confidential information.