By Katy Burne
A U.S. appeals court on Wednesday affirmed a district court's earlier dismissal of claims by former Federal Reserve Bank of New York bank examiner Carmen Segarra against the regulator and some of its employees.
In the decision, the Second U.S. Circuit Court of Appeals in New York concluded the claims by Ms. Segarra against the New York Fed and the executives were "without merit." It said she couldn't maintain her claims against the defendants under banking whistleblower protection laws.
A lawyer for Ms. Segarra said she disagreed with the appeals court decision and that they are "considering our legal options."
Ms. Segarra was hired by the New York Fed in October 2011 as a senior bank examiner and worked there less than seven months. Her first assignment was to examine the legal and compliance division of Goldman Sachs Group Inc., including potential conflicts of interest.
In her complaint filed in late 2013, she claimed her examinations had been "repeatedly obstructed" by the New York Fed and that she was subsequently fired for her views on Goldman. Her case became a flash point because of tapes she released from her time at the regulator, apparently depicting the New York Fed as deferential toward Goldman.
Around the time Ms. Segarra examined Goldman, a series of news reports surfaced that raised questions about Goldman's conflict-of-interest policy in relation to three deals she was assigned to study.
Ms. Segarra alleged that Goldman had no firmwide conflict-of-interest policy that complied with banking guidelines, and that when she told New York Fed supervisors they tried to get her to change her exam findings. She refused and alleged that this led them to fire her three business days later, in May 2012.
A federal-district court had dismissed her suit in April 2014, and she appealed.
In its 10-page decision, the appeals court said that certain details of Ms. Segarra's claims were "entirely speculative, meritless, and frankly quite silly" and that she failed to satisfy the whistleblower protection statute under which she had sought to advance her claim.
Besides the New York Fed, the remaining individual defendants were Michael Silva, who is no longer at the regulator but was the relationship manager between the New York Fed and Goldman; as well as Michael Koh and Johnathon Kim, executives who remain at the New York Fed. Mr. Kim was Ms. Segarra's supervisor.
In her complaint, Ms. Segarra alleged Mr. Silva was concerned that any alleged implication that Goldman may not have had a firmwide conflict-of-interest policy could incite panic among its clients and cause Goldman to "explode" if they withdrew their money en masse.
Representatives at the New York Fed had no comment on the appeals ruling, including for Mr. Koh and Mr. Kim. Last year, the bank said in a statement it rejected the allegations.
In court documents from October 2013, the New York Fed said Ms. Segarra had attempted settlement discussions in the past, including a demand that it "pay her over $7 million." The New York Fed at the time said it had no interest in such a settlement proposal.
A lawyer for Mr. Silva said he welcomed the decision and he was "happy to put this matter behind him and to move forward."
Goldman, which wasn't a defendant, has previously said it "has long had a comprehensive approach for addressing potential conflicts."
Write to Katy Burne at firstname.lastname@example.org