said.
“I don’t want to even get there,” Kim responded.
It would be unfair to fire her, Segarra offered, since she was doing a good job.
“I’m here to change the definition of what a good job is,” Kim said. “There are two parts to it: Actually producing the results, which I think you’re very capable of producing the results. But also be mindful of enfolding people and defusing situations, making sure that people feel like they’re heard and respected.”
Segarra had thought her job was simple: Follow the evidence wherever it led. Now she was being told she had to “enfold” business-line specialists and “defuse” their objections.
“What does this have to do with bank examinations,” Segarra wondered to herself, “or Goldman Sachs?”
Segarra worked on her examination of Goldman’s conflict-of-interest policies for nearly seven months. Her mandate was to determine whether Goldman had a comprehensive, firm-wide conflicts-of-interest policy as of Nov. 1, 2011.
Segarra has records showing that there were at least 15 meetings on the topic. Silva or Kim attended the majority. At an impromptu gathering of regulators after one such meeting early that December, her contemporaneous notes indicate Silva was distressed by how Goldman was dealing with conflicts of interest.
By the spring of 2012, Segarra believed her bosses agreed with her conclusion that Goldman did not have a policy sufficient to meet Fed guidance.
During her examination, she regularly talked about her findings with fellow legal and compliance risk specialists from other banks. In April, they all came together for a vetting session to report conclusions about their respective institutions. After a brief presentation by Segarra, the team agreed that Goldman’s conflict-of-interest policies didn’t measure up, according to Segarra and one other examiner who was present.
In May, members of the New York Fed team at Goldman met to discuss plans for their annual assessment of the bank. Segarra was sick and not present. Silva recounts in an email that he was considering informing Goldman that it did not have a policy when a business-line specialist interjected and said Goldman did have a conflict-of-interest policy 2013 right on the bank’s website.
In a follow-up email to Segarra, Silva wrote: “In light of your repeated and adamant assertions that Goldman has no written conflicts of interest policy, you can understand why I was surprised to find a “Conflicts of Interests Section” in Goldman’s Code of Conduct that seemed to me to define, prohibit and instruct employees what to do about it.”
But in Segarra’s view, the code fell far short of the Fed’s official guidance, which calls for a policy that encompasses the entire bank and provides a framework for “assessing, controlling, measuring, monitoring and reporting” conflicts.
ProPublica sent a copy of Goldman’s Code of Conduct to two legal and compliance experts familiar with the Fed’s guidance on the topic. Both did not want be quoted by name, either because they were not authorized by their employer or because they did not want to publicly criticize Goldman Sachs. Both have experience as bank examiners in the area of legal and compliance. Each said Goldman’s Code of Conduct would not qualify as a firm-wide conflicts of interest policy as set out by the Fed’s guidance.
In the recordings, Segarra asks Gwen Libstag, the executive at Goldman who is responsible for managing conflicts, whether the bank has “a definition of a conflict of interest, what that is and what that means?”
“No,” Libstag replied at the meeting in April.
Back in December, according to meeting minutes, a Goldman executive told Segarra and other regulators that Goldman did not have a single policy: “It’s probably more than one document 2013 there is no one policy per se.”
Early in her examination, Segarra had asked for all the conflict-of-interest policies for each of Goldman’s divisions as of Nov. 1, 2011. It took months and two requests, Segarra said, to get the documents. They arrived in March. According to the documents, two of the divisions state that the first policy dates to December 2011. The documents also indicate that policies for another division were incomplete.
ProPublica and This American Life sent Goldman Sachs detailed questions about the bank’s conflict-of-interest policies, Segarra and events in the meetings she recorded.
In a three-paragraph response, the bank said, “Goldman Sachs has long had a comprehensive approach for addressing potential conflicts.” It also cited Silva’s email about the Code of Conduct in the statement, saying: “To get a balanced view of her claims, you should read what her supervisor wrote after discovering that what she had said about Goldman was just plain wrong.”
Goldman’s statement also said Segarra had unsuccessfully interviewed for jobs at Goldman three times. Segarra said that she recalls interviewing with the bank four times, but that it shouldn’t be surprising. She has applied for jobs at most of the top banks on Wall Street multiple times over the course of her career, she said.
The audio is muddy but the words are distinct. So is the tension. Segarra is in Silva’s small office at Goldman Sachs with his deputy. The two are trying to persuade her to change her view about Goldman’s conflicts policy.
“You have to come off the view that Goldman doesn’t have any kind of conflict-of- interest policy,” are the first words Silva says to her. Fed officials didn’t believe her conclusion 2014 that Goldman lacked a policy 2014 was “credible.”
Segarra tells him she has been writing bank compliance policies for a living since she graduated from law school in 1998. She has asked Goldman for the bank’s policies, and what they provided did not comply with Fed guidance.
“I’m going to lose this entire case,” Silva says, “because of your fixation on whether they do or don’t have a policy. Why can’t we just say they have basic pieces of a policy but they have to dramatically improve it?”
It’s not like Goldman doesn’t know what an adequate policy contains, she says. They have proper policies in other areas.
“But can’t we say they have a policy?” Silva says, a question he asks repeatedly in various forms during the meeting.
Segarra offers to meet with anyone to go over the evidence collected from dozens of meetings and hundreds of documents. She says it’s OK if higher-ups want to change her conclusions after she submits them.
But Silva says the lawyers at the Fed have determined Goldman has a policy. As a comparison, he brings up the Santander deal. He had thought the deal was improper, but the general counsel reined him in.
“I lost the Santander transaction in large part because I insisted that it was fraudulent, which they insisted is patently absurd,” Silva said, “and as a result of that, I didn’t get taken seriously.”
Now, the same thing was happening with conflicts, he said.
A week later, Silva called Segarra into a conference room and fired her. The New York Fed, he told Segarra, who was recording the conversation, had “lost confidence in [her] ability to not substitute [her] own judgment for everyone else’s.”
Producer Brian Reed of This American Life contributed reporting to this story. ProPublica intern Abbie Nehring contributed research.
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