Judge Dismisses Examiner’s Suit Against New York Fed

A former bank examiner with the Federal Reserve Bank of New York lost a lawsuit against her former employer after a federal judge ruled she had not shown that she was fired over refusing to change certain findings about Goldman Sachs.

In her ruling on Wednesday, Judge Ronnie Abrams said that the examiner, Carmen M. Segarra, failed to prove that her firing was directly related to her finding that the bank had exhibited certain questionable ethics practices, including a lack of internal conflict-of-interest policies.

“The law only protects those who adequately allege that they have suffered retaliation for providing information regarding a possible violation of a ‘law or regulation,’ as distinct from what the law treats as advisory guidance,” the judge wrote. “Plaintiff has not done so here.”

Ms. Segarra raised alarm bells at the Fed after discovering that Goldman lacked any firmwide conflict of interest policies, and that it had not conducted an anti-money laundering analysis on one deal on which the bank had advised, according to the lawsuit.

Representatives for Ms. Segarra could not be reached.

“We’re pleased the suit was dismissed,” said Michael DuVally, a spokesman for Goldman Sachs. A spokeswoman for the Fed, Andrea Priest, declined to comment.

There is little debate that Ms. Segarra’s findings raised her superiors’ eyebrows. In March 2012, a group of Fed examiners voted to downgrade a confidential rating that the agency issues, a move that could have led to other disciplinary actions against the bank.

Weeks later, Ms. Segarra said in her lawsuit, her bosses asked her to change her conclusions about Goldman amid concerns that such conclusions could cause the firm substantial financial harm. Ms. Segarra claimed that she refused and was subsequently fired.

Ms. Segarra also said that the Fed and its employees “repeatedly” interfered with her investigation of Goldman Sachs, and that they had “irreparably damaged” her career in banking.

Ms. Segarra, who attended Harvard, Columbia and Cornell University Law School, began working as a senior bank examiner at the Fed in October 2011, according to court filings. Her supervisor assigned Ms. Segarra to look into Goldman Sachs’s conflict-of-interest policy, particularly the firm’s actions in a number of deals that had drawn regulatory scrutiny.

Soon after she joined the Fed, Ms. Segarra looked into Goldman’s advisory work on El Paso, an energy company which sold itself to Kinder Morgan in 2011. Goldman owned a large stake in Kinder Morgan, which led El Paso shareholders to argue that Goldman had an incentive to undervalue the company.

Goldman argued that it had acted above-board on the deal, but it led Ms. Segarra to press the bank for its firmwide conflicts-of-interest policy, only to learn that it had none.

While the Fed appeared to initially take Ms. Segarra’s concerns seriously, executives later began to doubt her conclusions. In one email in May of 2012, Michael Silva, one of the senior executives named in the suit, called Ms. Segarra’s claims “debatable at best, or alternatively, plainly incorrect.”