Secret Audio Recordings at the Federal Reserve

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At the heart of the United State’s economic infrastructure rests the US Federal Reserve, often referred to simply as the Fed. Created in December of 1913 as a response to a series of financial panics, the Fed’s primary responsibilities include include conducting the nation’s monetary policy, supervising and regulating banking institutions, maintaining the stability of our financial system and providing financial services to depository institutions, the U.S. government, and foreign official institutions. Although the roles and techniques of the fed have changed and evolved over the years, these are the primary tasks of the Fed still today.

The financial instability of 2008, nearly 100 years following the creation of the Fed, showed that despite their best efforts, economic downturn and chaos still occur. As a response to the collapse of several major financial institutions, Congress decided to give the Fed more oversight authority of the nation’s private financial institutions. To this end, the Fed began hiring Expert Examiners to be stationed within many of these “too-big-to-fail” financial institutions as compliance experts. Once such person was Carmen Segarra who was hired via the New York Fed to oversee Goldman Sachs.

Wiretapping, the secretive recording of a conversation either in person or over a phone, can come with serious legal risks when not done lawfully. And this is exactly what Segarra did.

Not long after beginning her employment of working as an Expert Examiner for the Fed, Segarra started observing that her recommendations regarding Goldman Sachs where going unheeded. Further, she became concerned that she may be fired as a retaliatory response to her refusal to go along with the Fed’s alleged “status quo” of leniency –or even ambivalence– to the banking practices of large financial institutions. Seven months later, Segarra was indeed fired. During her employment, however, she clandestinely recorded approximately 46 hours of meetings and conversations between herself and her superiors, managers, and colleagues.

Twelve states, California included, have laws requiring that all parties being recorded must have foreknowledge of the recording. Many states, including New York (where Segarra made her recordings), require that only one party to be informed of the recording. Whatever the case may be, it is important that anyone wanting to create an audio recording know how to do so lawfully within their locale.

In Segarra’s case, she was preemptively preparing for her defense for any action taken against her by her employer. That being the case, her audio recordings are a major piece of evidence in her civil lawsuit against the Fed for her firing.

Segarra’s recordings may illustrate many points; the first of which is a US Fed that is often reluctant to push hard against a large financial institution -such as Goldman Sachs- when the Fed feels policies are being stretched or broken. Further, her recordings show the Fed often struggled to define it’s own supervisory capacity in how it handled these large financial institutions. Sensing these issues, Segarra’s concern grew.

The week she was fired, Segarra recorded a meeting where her boss continuously attempted to convince her to change her conclusion that Goldman Sachs was missing a policy within an upcoming acquisition. Although Segarra agreed to allow her work to be reviewed and overruled by her higher-ups, she steadfastly refused to alter her conclusions.

In an earlier recording, her boss reassured his team (which included Segarra) that, “I’d like these guys [Goldman Sachs] to come away from this meeting confused as to what we think about it. I want to keep them nervous”. His comments were in reference to the upcoming business deal Goldman was going to conduct over which Segarra had concerns. Her boss’s comments were meant to sound tough. However, in the actual meeting, he buckled and no objections were raised against Goldman Sachs.

Although these are just a couple of examples, Segarra collected hours upon hours of such meetings and conversations. Her efforts may serve as an example for anyone wanting to protect themselves. When done lawfully, recording a conversation can be an invaluable tool in a case. As the technology continues to improve, recording devices are becoming smaller and secretly recording a conversation is becoming easier. It’s not unreasonable to assume that nearly all conversations in the near future will be recorded. Make sure you know what you need to in order to protect yourself, regardless of what end of the recording you find yourself. What’s further is that even if the recording is made illegally (e.g. in secret and without consent) it may still be used as evidence in court, either civil or criminal.

The complete “This American Life” article can be accessed here.

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