Whitehouse writes: "Goldman Sachs has agreed to pay $50 million in a case that has ignited fresh criticisms over the revolving door between Wall Street and the government."



Goldman Sachs office. (photo: AP)

In Case Highlighting Revolving Door Between Wall Street and Government, Goldman Sachs to Pay 50 Million for Data Leak

By Kaja Whitehouse, USA TODAY

oldman Sachs has agreed to pay $50 million in a case that has ignited fresh criticisms over the revolving door between Wall Street and the government.

According to the New York Department of Financial Services, a banking regulator, Goldman hired Rohit Bansal from the Federal Reserve Bank of New York in May 2014, "in large part for the regulatory experience and knowledge he had gained while working at the New York Fed."

Goldman hired Bansal despite the fact that he had been forced to resign from the Fed for breaking the rules there, NYDFS said. And once at Goldman, Bansal was instructed to work on a bank that he had supervised while at the Fed, despite explicit prohibitions against him doing so, NYDFS said.

Bansal later used confidential information, some of which he obtained from his prior employment at the NY Fed and some of which he obtained from from a former NY Fed colleague, in his work on the bank. One such instance came after Bansal attended a birthday bash at the famous Peter Luger's Steakhouse with several of his former NY Fed colleagues.

To resolve the matter, Goldman has agreed to pay $50 million and accept a three-year "voluntary abstention" from accepting new consulting engagements of NYDFS regulated entities.

Goldman also agreed to admit that a former employee engaged in the criminal theft of confidential information and that Goldman management "failed to effectively supervise its employee to prevent this theft from occurring," NYDFS said.

"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," NYDFS's acting superintendent Anthony Albanese said in a statement.

"That employee and a more senior employee who failed to escalate the issue, were terminated shortly thereafter," Goldman said in an emailed statement. "We have zero tolerance for improper handling of confidential information."

Wall Street in general has been criticized for encouraging a revolving door between its executives and influential government agencies. One way they have been accused of doing this is through programs that accelerate stock options for employees who jump ship for government jobs, according to critics of the practice.

Bansal was forced to resign from the NY Fed in March 2014 for breaking certain rules, including taking his work BlackBerry overseas without obtaining authorization, and for attempting to falsify records to make it look like he had obtained such authorization, NYDFS said. Bansal also engaged in unauthorized communications with the Federal Reserve Board, NYDFS said.

Goldman wooed him anyway, including calls, lunch and dinner, NYDFS said. Then, after learning that Bansal was prohibited “from knowingly accepting compensation as an employee, officer, director, or consultant" of the bank until Feb. 1, 2015, Bansal's supervisor allowed him to work with the prohibited bank entity anyway, NYDFS said.

This led to Bansal obtaining confidential Fed data to better help him in his work. In September 2014, for example, Bansal attended the birthday dinner of a former Fed colleague at Peter Luger's. Immediately after the dinner, Bansal emailed his boss at Goldman "divulging confidential information concerning the regulated entity, specifically, the relevant component of the upcoming examination rating.," NYDFS said.