Suit Revives Goldman Conflict Issue 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. Even now, banks have sway over their regulators, especially those stationed at a bank's headquarters, according to two former regulators who spoke on the condition of anonymity. The banks, for example, can work behind the scenes to avert a vote like the one to downgrade Goldman. The people said, however, that once a vote to downgrade has taken place, it is difficult to reverse. In the lawsuit, which was filed in Federal District Court in Manhattan, Ms. Segarra contends she was wrongfully terminated in violation of a federal law that affords protections to bank examiners who find wrongdoing in the course of doing their jobs. Mr. Silva, who is chief of staff for the executive group at the New York Fed, is among the defendants named in the suit. Jack Gutt, a New York Fed spokesman, declined to comment on Ms. Segarra's case, citing rules that restrict what the regulator can discuss. Personnel decisions at the New York Fed are based exclusively on individual job performance and are subject to thorough review. We categorically reject any suggestions to the contrary," he said in a statement. Mr. Silva declined to comment through the Fed spokesman. A Goldman spokesman, Michael DuVally, said his company had no knowledge of internal New York Fed discussions or matters related to Ms. Segarra. As we have described publicly in our Business Standards Committee report, Goldman Sachs has a comprehensive approach to addressing conflicts through firmwide and divisional policies and infrastructure. In an interview, Ms. Segarra said that when she was fired, her bosses told her they had lost confidence in her judgment. Within the Fed, some people who worked with Ms. Segarra echoed those concerns, according to people with knowledge of her time at the agency. Ms. Segarra, these people said, sometimes developed "conspiracy theories." Ms. Segarra landed the job at the New York Fed in October 2011 after a career on Wall Street that included jobs at Citigroup and Bank of America. She was assigned to assess Goldman's conflict-of-interest program to determine whether it complied with Fed standards. Banks are required to have detailed policies in place to deal with conflict of interests. Ms. Segarra said these policies typically defined what constituted various conflicts, how the bank might penalize employees who violated those rules and also how the firm made sure that it did not inadvertently promote questionable behavior. Under the New York Fed's guidelines, banks are required to have "processes established to manage compliance risk across an entire organization, both within and across business lines, support units, legal entities, and jurisdictions of operation." These guidelines are aimed at ensuring that banks have reviewed business transactions to make sure that relationships with one client do not conflict with other clients or with the bank itself. After Ms. Segarra joined the New York Fed, she said she examined several potentially controversial Goldman deals. For instance, in 2012 Goldman advised El Paso, an energy company, on its decision to sell itself to Kinder Morgan. Goldman owned a big stake in Kinder Morgan, which angered a number of El Paso shareholders, who argued this gave Goldman an incentive to undervalue El Paso. Goldman maintained that it had properly managed the conflicts but was later admonished by a judge, who noted the "disturbing behavior" that led to the deal. As the deal was coming together, the lawsuit said, Ms. Segarra urged Goldman to provide her with its firmwide conflict-of-interest policy. But Goldman, the lawsuit said, told her that it had no such policy. While Goldman lacked a broad conflict-of-interest policy, the lawsuit says, individual business units did have some procedures in place. For Ms. Segarra, the absence of a firmwide policy was alarming because it signaled that Goldman lacked the procedures to spot and police conflicts, according to the suit. Such concerns, the lawsuit said, prompted Ms. Segarra to raise the issue with Mr. Silva, her boss, in a meeting in early December 2011. He seemed to agree. Mr. Silva "expressed concern that Goldman would suffer significant financial harm if consumers and clients learned the extent of Goldman's noncompliance with the rules on conflict of interest," according to the lawsuit. Soon, though, Ms. Segarra was looking at another deal, involving Banco Santander, the largest bank in Spain, and Qatar Holding. As part of her review, Ms. Segarra asked Goldman to provide documentation that it had performed an anti-money-laundering analysis. According to the lawsuit, Goldman executives told Ms. Segarra that it had done the analysis, but the bank later backpedaled, admitting that no such work had been performed. Ms. Segarra took her concerns about the transaction to her bosses, who confronted Goldman. She contends that Michael S. Koh, another senior staff member at the New York Fed and a defendant in the lawsuit, told her that Goldman admitted to the misconduct but then he dismissed her concerns. Further efforts to raise the issue were also stymied and her bosses prohibited her from asking Goldman more questions about the deal - a decision that prevented her from finishing her report. Mr. Koh, through the Fed spokesman, also declined to comment. In March 2012, Ms. Segarra got her chance to voice her concerns to the New York Fed's legal and compliance risk team. At the meeting, the group, roughly 20 people, agreed that the issues with Goldman's conflict-of-interest procedures warranted a warning, known-as a "matter requiring attention," or M.R.A., according to the lawsuit. As a result, the team approved a downgrade of Goldman's annual rating from a 2, indicating satisfactory to a 3, indicating fair, according to a confidential document reviewed by The Times. The rating involving policies and procedures is one of several measurements that make up Goldman's overall score, which is confidential. In the weeks after the vote, Ms. Segarra's supervisors began to question her findings about Goldman, according to a review of e-mails. Mr. Silva said her conclusions "are debatable at best, or alternatively, plainly incorrect," according to a late-night e-mail sent on May 13, 2012. Mr. Silva explained that a "cursory review" of Goldman's Web site showed that the bank had a conflict-of-interest section within its code of conduct that "seems to me to define" conflict of interest. Days after this contentious exchange, Ms. Segarra said in the lawsuit, Mr. Silva and Mr. Koh pressed her to excise her negative findings on Goldman from her examination. The men, Ms. Segarra said, told her that they did not find her position "credible." Ms. Segarra said she refused to modify her findings - a position she said she reiterated in an e-mail. On May 23, 2012, Ms. Segarra was terminated and escorted from the building.