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Goldman Sachs has been ordered to pay a $36.3 million penalty relating to a case in which a former employee allegedly used confidential regulatory information to win clients.
In an order issued Wednesday, the U.S. Federal Reserve ordered the bank to pay the fine in regard to a case involving Joseph Jiampietro, an investment banker who regulators say used a Fed contact later hired by Goldman to obtain the information.
The offenses happened between Feb. 15, 2012 and Oct. 3, 2014 and came as Jiampietro was under fire at Goldman and told to find ways to generate more revenue, a complaint states. Jiampietro then allegedly developed a scheme where he "repeatedly obtained, used and disseminated" confidential information to lure prospective clients.
Regulators allege that Jiampietro worked with Rohit Bansal, a former Fed employee who was hired by Goldman to work on the firm's fixed income desk. Jiampietro coached Bansal on how to land a job, then used him to get confidential "enterprise-wide risk management" (ERM) information through a contact Bansal had at the Fed, according to the complaint.
"In August and September, Bansal and Jiampietro used the non-public ERM framework in at least five pitches to potential and existing clients," the Fed charged.
Using the information "gave Jiampietro and Goldman Sachs a competitive advantage in providing regulatory advisory services and provided a personal benefit to Jiampietro."
The matter came to a head on Sept. 26, 2014, when Bansal allegedly sent an email to a Goldman partner containing what the partner knew to be ill-gotten confidential documents, according to the Fed complaint. The partner then notified Goldman's compliance department. The firm ultimately fired both workers.
""We're 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."
However, the Fed said Goldman was partially to blame.
In a news release, the central bank said Goldman "did not have sufficient policies, procedures, or adequate employee training in place to ensure compliance with current laws prohibiting the unauthorized use or disclosure of confidential supervisory information."
The Fed said it will be monitoring Goldman to make sure it has the proper procedures in place.
Bansal had previously pleaded guilty to one count of misappropriating government property and has been barred from the banking industry. The Fed wants Jiampietro to pay a $337,500 penalty. Contact information for both Bansal and Jiampietro was not immediately available.