Here's the thing about disclosing confidential information to third-party analysts while serving as a regional president of a Federal Reserve bank: Don't. But if you slip up and do, you have a few options. You can:
a) immediately own up to your mistake
b) keep quiet until interviewed by Fed counsel months later, then admit
c) lie to the Fed counsel only to spill the beans to the FBI three years later
d) take it to the grave
The Richmond Fed's Jeffrey Lacker apparently took option C. After he massively breached protocol by confirming information due to be released days later to a Medley Global Advisors analyst – sparking the Fed's biggest legal scandal in decades – Lacker basically chose the worst of both worlds, keeping mum with an internal investigation only to face the music four years later.
In a statement, Lacker expressed “regret that in this instance I crossed the line to confirming information that should have remained confidential.” That's not his only regret. From the statement:
Following these events, I was interviewed on December 10, 2012, as part of an internal review conducted by the General Counsel of the FOMC. In advance of that interview, on December 6, 2012, I provided written responses to a questionnaire issued by the General Counsel seeking, among other things, all relevant information regarding my communications with the Analyst. Although it was my intention to cooperate fully with the internal review, I regret that I did not disclose to the General Counsel, either in my December 6, 2012 questionnaire or the December 10, 2012 interview, that the Analyst was in possession of confidential information during my conversation with her on October 2, 2012.
It was only three years later, in a 2015 interview with the U.S. Attorney’s Office for the Southern District of New York, the Office of the Inspector General of the Fed, the FBI, and the CFTC that Lacker copped to his error. His lawyer said no charges are forthcoming.
The Richmond Fed wasn't thrilled with all this. Here's their statement:
The Federal Reserve places a high priority on safeguarding information. We expect every employee to comply with all relevant policies and procedures, as well as our standards of conduct. Employees must review and acknowledge our policies annually. Once our Bank’s Board of Directors learned of the outcome of the government investigations, they took appropriate actions.
We are focused on moving forward within our organization—and were already underway with our presidential search, following Jeffrey Lacker’s announcement in January to retire in 2017.
Sounds like someone didn't go willingly. Finally, here's the Fed, with the briefest statement of all:
The Federal Reserve is committed to maintaining the security of confidential FOMC information. We cooperated fully with the independent law enforcement investigation into an unauthorized disclosure in 2012. We appreciate the diligent efforts made to bring this matter to its conclusion.
One would be forgiven for reading that final line and thinking it's time we all clapped our hands and forgot about this whole sordid and embarrassing affair and left our nation's central bank to once again go about its business with the full trust of the American populace. But there are some lingering questions. Like:
- Lacker's statement implies that he was not the source of the leak, but only served as backup. He cites, with a painful degree of exactitude, his “failure to decline comment on the information could have been taken by the Analyst, in the context of the conversation, as an acknowledgment or confirmation of the information.” What of the original leaker(s)?
- Lacker admitted his transgression in 2015 to parties including the Fed's own inspector general. Then in March 2016, he was reappointed to another 5-year term by the Federal Reserve Board. What's up with that?
- “We appreciate the diligent efforts made to bring this matter to its conclusion,” says the Fed. What? Has the matter been brought to its conclusion? Or are the efforts ongoing and the conclusion still coming?