Fed Readies Enforcement Action Against Goldman Sachs in Theft of Secrets
July 25 2016 - 9:50PM
Dow Jones News
The Federal Reserve is preparing to bring an enforcement action
against Goldman Sachs Group Inc. and one of its former executives
over a case concerning the theft of central-bank secrets two years
ago, people familiar with the matter said.
The planned action, reported earlier by the New York Times,
shows the Fed is advancing its own investigation into the incident,
in which confidential regulatory materials were leaked to a Goldman
staffer from one of his former colleagues at the Federal Reserve
Bank of New York. The Fed last year permanently banned from the
banking industry the former Goldman staffer who obtained the
sensitive documents, and the central bank is now expected to pursue
a similar ban for that staffer's former supervisor.
The leak was a black eye for the central bank because it raised
fresh questions about the so-called revolving door between the
regulator and Wall Street after much criticism in the wake of the
financial crisis that the Fed was too lenient on big banks. Since
the incident, the Fed has been weighing new measures to tighten the
restraints it imposes on bank examiners who leave for jobs with
financial institutions.
The enforcement actions could come in the next few weeks, one of
the people familiar with the case said. Eric Kollig, a spokesman
for the Federal Reserve Board of Governors in Washington, declined
to comment.
The Fed is expected to seek to ban former Goldman executive
Joseph Jiampietro from the banking industry. Mr. Jiampietro was
fired by Goldman in October 2014, and his most recent role was as a
managing director in the investment-banking division.
Adam Ford, a lawyer for Mr. Jiampietro, said, "He did nothing
wrong," adding any such Fed action would contrast with other
regulators who took no action against him. He said his client is
planning to deny he violated any laws, claiming his only
involvement was receiving the documents as part of his job, and he
didn't request or use any of them.
A spokeswoman for Goldman said that when the firm discovered the
sensitive documents had been obtained, it began its own
investigation, terminated the employees implicated and changed its
hiring practices for former government employees.
The Fed in November permanently banned from the industry Rohit
Bansal, the Goldman employee who got the secrets while working
under Mr. Jiampietro.
The Securities and Exchange Commission brought its own sanctions
against Mr. Bansal in June and the Financial Industry Regulatory
Authority also barred him from associating with any Finra member
firms.
The Fed didn't fine Goldman when it discovered the theft, but
the bank paid $50 million to settle charges last year from the New
York State Department of Financial Services that it failed to
properly supervise Mr. Bansal. A DFS spokesman declined to
comment.
Goldman accepted a three-year ban on regulatory consulting
involving the department as part of that arrangement. In its own
investigation, the bank concluded Mr. Jiampietro failed to properly
inform Goldman managers about the incident.
Mr. Bansal, who is in his 30s, is now a cooperating witness in
the case under the terms of his sentencing. He pleaded guilty in
November to one count of a misdemeanor offense in misappropriating
government property in Manhattan federal district court.
He was fined $5,000 in March and was sentenced to two years'
probation with 300 hours of community service. Scott Morvillo, a
lawyer for Mr. Bansal, declined to comment.
The former New York Fed employee who passed the secrets on to
Mr. Bansal, Jason Gross, also pleaded guilty in Manhattan federal
district court.
Write to Katy Burne at katy.burne@wsj.com
(END) Dow Jones Newswires
July 25, 2016 21:35 ET (01:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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