The Federal Reserve Board has ordered Goldman Sachs Group to pay a $36.3 million civil penalty for using confidential Fed information on other banks to try and solicit business from existing and prospective clients at least five times from February 2012 to October 2014. The Fed also said it has barred from the banking industry a since-fired Goldman managing director, Joseph Jiampietro, who was at the center of the scheme, and fined him $337,500.
The cease-and-desist order says Jiampietro breached his fiduciary duty in using confidential banking regulatory information — “misappropriated Confidential Supervisory Information,” or CSI — “in connection with his regulatory advisory practice in order to benefit himself in his position at Goldman Sachs.”
The Fed also ordered Goldman to institute “enhanced” procedures to “ensure compliance with current laws prohibiting the unauthorized use or disclosure of confidential supervisory information.”
Investment banker Jiampietro was hired by Goldman in early 2011, and the complaint says he began using CSI in 2012. Prior to joining Goldman, from 2009 to 2010, Jiampietro was a senior advisor to Chairwoman Sheila Bair at the Federal Deposit Insurance Corp. and was legal counsel to the Senate Banking Committee in 1995-’96. He had previously been an investment banker at JPMorgan and UBS.
When he was hired by Goldman, The New York Times Dealbook column called him “one of the government’s top dealmakers during the financial crisis,” saying he “helped coordinate more than 100 government-assisted bank deals” during the crisis.
In October 2015, the New York Department of Financial Services, the state’s banking regulator, imposed a $50 million fine on Goldman for allowing employee Rohit Bansal to use that regulator’s confidential information in advising clients. Bansal, a former supervisor at the New York Fed, was hired by Goldman in 2014 at the prompting of Jiampietro, according to the Fed complaint, which says that while at the New York Fed, Bansal served as the “Central Point of Contact for Bank A.”
In 2014, the complaint alleges, Jiampietro “served as the lead banker for numerous financial institution clients, including Bank A.”
As one example of how the two used the confidential information, the complaint says Jiampietro and Bansal used the confidential information about Bank A’s stress test and other regulatory information in soliciting the business of a “Bank B,” with the effect of “giving Jiampietro and Goldman Sachs a competitive advantage in soliciting Bank B’s business.”
In a statement, Goldman said it was “pleased to have resolved this matter. Upon discovering that Rohit Bansal had improperly obtained information from his former employer, the Federal Reserve Bank of New York, we immediately notified regulators, including the Federal Reserve,” Goldman said in a statement. “We previously reviewed and strengthened our policies and procedures after Bansal was terminated. We have no tolerance for the improper handling of confidential supervisory information.”
CSI includes information on bank examinations and “other confidential reports prepared by banking regulators,” the Fed complaint says, further pointing out “it is illegal to use or disclose confidential supervisory information without prior approval of the appropriate banking regulator.”
Today’s order prohibits Goldman Sachs from “re-employing individuals involved in the improper disclosure of confidential supervisory information or retaining them as consultants or contractors.” In addition to firing Jiampietro, Goldman also let go Bansal.