Risk & Compliance

Goldman Fined $50M Over N.Y. Fed Document Theft

The investment bank admitted it failed to supervise an employee who was a former bank examiner at the Federal Reserve Bank of New York.
Matthew HellerOctober 29, 2015
Goldman Fined $50M Over N.Y. Fed Document Theft

Goldman Sachs has agreed to pay $50 million to settle charges that it failed to supervise a former employee who stole documents from the New York Federal Reserve Bank, his previous employer, to use in advising a client.

As part of a settlement with New York regulators announced Wednesday, Goldman also took the rare step of admitting its failure to supervise Rohit Bansal, an associate in its investment banking division, and accepting a three-year ban on access to certain sensitive regulatory information.

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Bansal joined the firm in July 2014 after working for seven years as a bank examiner at the New York Fed. He was assigned to advise one of the banks he previously regulated and allegedly received confidential regulatory information about the bank from Jason Gross, a former colleague who was still working at the New York Fed.

The Federal Reserve Bank of New York building.

The Federal Reserve Bank of New York building.

“This case underscores the critical need for financial institutions to put in place strong controls and policies for employee-conflicts screening and the use of confidential regulatory information,” Anthony J. Albanese, acting head of the New York State Department of Financial Services (NYDFS), said in a news release.

The New York Times said the case illustrates the blurred lines between Wall Street and its regulators, noting that “Perhaps more than any other bank, Goldman swaps employees with the government, earning it the nickname ‘Government Sachs.’”

“While the so-called revolving door is common on Wall Street, the [case] exposes the perils of the job hopping, affirming the public’s concerns that regulators and bankers, when intermingled, occasionally form unholy alliances,” The Times said.

According to the NYDFS, Bansal was hired by Goldman “in large part for the regulatory experience and knowledge he had gained while working at the New York Fed.” Even though he told supervisors that ethical restrictions prevented him from advising the client he used to oversee, Goldman “affirmatively placed” him on matters involving that same bank “beginning on his first day.”

Ultimately, Bansal received about 35 different documents from Gross, including internal Fed memorandums regarding examinations of the bank.

Bansal and Gross are expected to accept a plea deal from federal prosecutors that could send them to prison for up to a year, the Times said.

Photo: Beyond My Ken, via Wikimedia Commons, CC BY-SA 4.0

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