By SUSANNE CRAIG and JESSICA SILVER-GREENBERG
At a March 2012 meeting, a group of examiners at the Federal Reserve Bank of New York agreed that Goldman Sachs had inadequate procedures to guard against conflicts of interest — guidelines aimed at stopping firms from putting their pursuit of profit ahead of their clients’ best interests.
The examiners voted to downgrade a confidential rating assigned by the New York Fed that could have spurred costly enforcement actions and other regulatory penalties. It is not known whether the vote in fact led to a rating change. The former examiner who pushed for a downgrade, Carmen M. Segarra, now contends in a lawsuit filed on Thursday that just weeks after the vote, her superiors asked her to change her findings on Goldman and fired her after she refused.
The vote to downgrade, which has not been previously reported, could have been a big blow for Goldman.
“Goldman Sachs does not have a conflicts-of-interest policy, not firmwide, and not for any divisions,” Ms. Segarra wrote to Michael F. Silva, a senior executive at the New York Fed. “I would go so far as to say they have never had a policy on conflicts.”
The lawsuit, along with a review by The New York Times of confidential government documents and internal e-mails, raises questions about the success of Goldman’s efforts to police potential conflicts.
The bank has been buffeted by accusations that it has put its own interests ahead of its clients, a contention it denies. Goldman, for instance, faced accusations that in the run-up to the financial crisis that it sold billions of dollars in souring real estate assets to unsuspecting clients. Just weeks before the examiners’ vote last year, the bank was publicly excoriated by a federal judge who found that Goldman had conflicts in a huge energy deal.
The lawsuit also provides a look into the often-opaque relationship between federal regulators and Wall Street. After the financial crisis, banking regulators faced criticism that they were too cozy with the banks that they were overseeing — a familiarity that failed to thwart some of the risky behavior precipitating the housing crisis and ensuing recession…