New York Fed Fails to Seal Fired Bank Examiner's Suit
In the wake of embarrassing publicity over a lawsuit filed by former bank examiner Carmen Segarra, the Federal Reserve Bank of New York has failed in its attempt to get parts of that lawsuit and its supporting documents sealed. Still, the bank indicated it will continue to take an aggressive approach against Segarra, stating in court filings that it believes she broke the law by revealing confidential documents, and even suggesting she could be subject to criminal charges.
In her Oct. 10 lawsuit, Segarra claims that the Fed fired her from her post as a senior bank examiner because she refused to change her assessment in the spring of 2012 that Goldman Sachs & Co. lacked proper policies to protect clients from the bank's conflicts of interest. In a brief order Tuesday, Manhattan U.S. District Judge Ronnie Abrams denied the New York Fed's emergency request for a protective order.
While the complaint had already been released to selected reporters and made public by ProPublica, the detailed exhibits had not been publicly available. Abrams instructed Segarra's counsel Linda Stengle to file those exhibits online. The court did, however, advise Stengle at Tuesday's hearing not to share more confidential bank information with the press without first getting the court's approval.
The New York Fed had claimed in an Oct. 11 letter to Abrams that Segarra had "purloined" confidential supervisory information from the bank to use in her lawsuit, including internal emails and memoranda. Calling this a "flagrant and clear violation of federal law," the bank hinted that it might press for criminal charges against Segarra. It warned that it has "zero tolerance" for employees who break the rules of confidentiality that apply to bank examinations, and attached a transcript from a case in which former New York Fed bank examiner Mauricio Garzon pleaded guilty in 1999 to a criminal misdemeanor for stealing confidential supervisory information. "We cannot turn a blind eye to Ms. Segarra's substantially similar conduct here," stated the letter, which was signed by New York Fed in-house counsel David Gross.
The New York Fed also asserted in its letter that Segarra had demanded $7 million to settle her claims before she sued.
Stengle responded in a letter to the court that the defendants had not cited any sensitive information revealed by the plaintiff, and that there is no good reason to negate the presumption that court documents should be public.
Stengle said that the New York Fed's reference to criminal charges was another example of the bank's heavy-handed tactics. "Frankly, we're alleging that they're bullies and they engage in intimidation," she told the Litigation Daily. "I worry it's an attempt to intimidate and bully my client." Asked about the settlment offer, Stengle said, "I don't have any knowledge of that. [My client] had prior counsel." She said she didn't know the name of that counsel.
A spokesperson for the New York Fed declined to comment.