NEW YORK -- By 2013, Joseph Jiampietro, a Goldman Sachs managing director, was in a bind. Though recognized as an expert in the wonky world of banking regulation, his bosses expressed concern about his performance.
Jiampietro's managers told him to "increase the amount of revenue generating business he brought to firm," court documents alleged.
Before long the investment banker was allegedly scheming to obtain confidential regulatory and government information to help advise Goldman Sachs' clients, according to government regulators and court documents. Jiampietro coached an employee of the Federal Reserve Bank of New York, Rohit Bansal, on how to get a job with Goldman Sachs and then repeatedly encouraged him to obtain documents from his former employer, federal regulators claim.
The leaks allegedly provided Goldman executives a window into the Fed’s private thoughts on regulatory matters -- and helped the executive woo clients, according to regulators.
The Federal Reserve this week ordered Goldman to pay an $36.3 million fine and moved to ban Jiampietro, who has denied wrongdoing, from the banking industry in a case that has become a Wall Street cautionary tale and thrown an embarrassing spotlight on the sometimes cozy relationship between banks and their regulators.
The flow of bankers and government officials between Wall Street and Washington has long been a sore point for public advocates who say it can create conflicts of interest as former bankers and regulators look out for their friends and their next jobs. Goldman Sachs has often been labeled a gateway to high-level Washington jobs -- two recent Treasury secretaries, Robert Rubin and Henry Paulson ran the bank for years -- gaining it the nickname "Government Sachs."
Industry officials dismiss those concerns, noting that there are laws in place to prevent conflicts of interest from taking root and that an expertise in banking can make someone a better regulator.
But this time, regulators allege there was a problem.
"The board of directors of Goldman Sachs must ensure that its senior management implements an effective compliance risk management framework," the Federal Reserve said in a statement.
Goldman Sachs is "pleased to have resolved this matter," the bank said in a statement that noted it reported the problem as soon as it was detected. "We have no tolerance for the improper handling of confidential supervisory information.” Goldman also has paid the New York Department of Financial Services a $50 million fine and agreed to restrictions on how it handles sensitive regulatory information for three years to resolve a separate investigation into the matter.
Jiampietro, who was fired by Goldman in 2014, has denied all charges. "The Fed has the law wrong and the facts wrong," his attorney, Adam Ford of the law firm Ford O'Brien LLP, said in a statement.
Bansal and Jason Gross, who Bansal worked with at the Federal Reserve of New York and who leaked the information, both pleaded guilty to misdemeanor criminal charges and were given probation.
Before joining Goldman in 2011, Jiampietro had already built an impressive Washington resume. He served as a senior advisor at the Federal Deposit Insurance Corp., a banking regulator, and legal counsel to the powerful Senate Banking Committee.
At Goldman Sachs, he advised mid-sized and regional banks on government regulations. But, according to the Federal Reserve, in order to boost his business Jiampietro "repeatedly obtained, used and disseminated" confidential information developed by regulators overseeing the banks.
Jiampietro used the information "to benefit himself in his position at Goldman Sachs," court records asserted.
The government investigation accused Jiampietro of obtaining confidential information in 2012, years before Bansal, the former Federal Reserve supervisor, joined Goldman. The Federal Reserve doesn't describe how Jiampietro allegedly obtained the information initially, but a person familiar with the case said Goldman Sachs apparently noticed some confidential information dating back to that time in emails Jiampietro received from clients during an internal investigation into the matter.
"The allegations that Mr. Jiampietro violated any regulation by possessing confidential information dating back to 2012 has never been raised before, comes out of the blue, and is an irresponsible allegation," Ford said. "Tellingly it comes without any factual support."
By 2014, Jiampietro had a new tool, regulators claim. Bansal was hired as a junior banker to help advise banks, including at least one he regulated while at the Federal Reserve. At around the same time, Jiampietro allegedly asked Bansal to obtain risk management information to use in client pitch meetings.
Bansal tapped into his network at the Federal Reserve, getting the documents from a former colleague, Gross. Bansal and Jiampietro used the leaked data in "at least five pitches to potential and existing clients," court documents allege. During his four months at Goldman, Bansal obtained about 35 documents on about 20 occasions from Gross, regulators claim.
Goldman detected the problem in October when a Goldman Sachs partner allegedly saw confidential information in an email sent by Bansal, according to regulators. Some New York Fed documents were then found on Jiampietro's desk.
"Upon discovering that Rohit Bansal had improperly obtained information from his former employer...we immediately notified regulators, including the Federal Reserve," Goldman said in a statement.
Jiampietro denies obtaining any confidential information, is fighting the Fed's case and suing Goldman Sachs for his legal fees. Goldman Sachs declined to comment on that suit.
"As Mr. Jiampietro has said from the start, he never requested confidential supervisory information from anyone, and never used it for his or anyone’s benefit," his attorney, Ford, said. "Mr. Jiampietro intends on fighting these allegations, and looks forward to full vindication."
In addition to being banned from the industry, Jiampietro faces a fine of up to $337,500.