Judge Denies New York Fed Employee Whistleblower Protection Over Firing

By Jonathan Stempel | April 24, 2014

A federal judge on Wednesday dismissed a lawsuit against the Federal Reserve Bank of New York by a former bank examiner who claimed the Fed fired her after she refused to change certain findings about Goldman Sachs Group Inc.

U.S. District Judge Ronnie Abrams in Manhattan ruled that the failure by the former examiner, Carmen Segarra, to connect her disclosure of Goldman’s alleged violations to her May 2012 firing was “fatal” to her whistleblower lawsuit. Abrams also said Segarra could not file an amended lawsuit.

“Congress sought to protect employees of banking agencies … who adequately allege that they have suffered retaliation for providing information regarding a possible violation of a ‘law or regulation,’” the judge wrote. “Plaintiff has not done so.”

Segarra’s findings that Goldman’s conflict-of-interest practices may have violated merely an “advisory letter” that did not carry the force of law did not entitle her to whistleblower protection under the Federal Deposit Insurance Act, Abrams said.

Linda Stengle, a lawyer for Segarra, did not immediately respond to requests for comment.

Jack Gutt, a New York Fed spokesman, declined to comment. The New York Fed has said its personnel decisions are based exclusively on job performance and subject to thorough review.

EL PASO

Segarra said she joined the New York Fed in October 2011, after previously working as a lawyer at Bank of America Corp and Citigroup Inc.

She said that at the New York Fed, her legal compliance and risk team had initially voted to downgrade Goldman’s annual rating for policies and procedures, after she had determined that the bank had no companywide conflict of interest policy.

She said her boss, Michael Silva, and his deputy, Michael Koh, became concerned that a downgrade could cause clients to stop doing business with the Wall Street bank, the lawsuit said.

According to the complaint, Segarra’s review included the roughly $23 billion takeover of pipeline company El Paso Corp by Kinder Morgan Inc. Goldman advised El Paso on the 2012 merger despite holding a big stake in Kinder Morgan.

Silva, Koh and another supervisor, Johnathon Kim, were also defendants in Segarra’s lawsuit, and Abrams dismissed claims against them. Goldman was not a defendant. A bank spokesman, Michael DuVally, declined to comment.

JUDGE-SHOPPING

In her ruling on Wednesday, Abrams also rejected a move by Stengle for greater disclosure by the judge about her husband’s relationship with Goldman Sachs.

Abrams disclosed on April 3 that she had just learned that her husband, Greg Andres, a partner at Davis Polk & Wardwell, was representing Goldman in an advisory capacity.

Stengle said at the time she would not seek Abrams’ recusal, the judge said, and went ahead the next day with scheduled oral arguments on the defendants’ bid to dismiss the case.

But on April 11, Stengle made a written request for a “more complete disclosure” of Andres’ relationship with Goldman, and Abrams’ own working relationship with another defense lawyer.

Abrams said that was too late, given that Segarra by then would have had a chance to “sample the temper of the court” and perhaps anticipate she would lose unless Abrams recused herself.

“The timing of plaintiff’s requests suggests that she is engaging in precisely the type of ‘judge-shopping’ the 2nd Circuit has cautioned against,” Abrams wrote, referring to the federal appeals court in New York. “Such an attempt to engage in judicial game-playing strikes at the core of our legal system.”

Susan Peters, a Davis Polk spokeswoman, did not immediately respond to requests for comment.

The case is Segarra v. Federal Reserve Bank of New York et al, U.S. District Court, Southern District of New York, No. 13-07173.

(Reporting by Jonathan Stempel in New York; Editing by Leslie Adler)

 

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