Tonight, the Board rejected my proposal to establish a committee that would oversee independent investigations by outside investigators of existing and future allegations of misconduct by FDIC executives. The Board instead adopted a convoluted and complicated process for another regulator to retain investigators to maybe someday, somehow, sort of investigate some subset of those allegations on behalf of the FDIC.
The details are complicated but shouldn’t distract from the basic truth here. Despite Vice Chairman Hill and my efforts, the Board continues to struggle to ensure accountability for wrongdoing. We will struggle with that accountability until we have a fresh start at the FDIC.
Stepping back, in April, the law firm Cleary Gottlieb Steen & Hamilton LLP released its report that documented sexual harassment and other misconduct at the FDIC of a scale and nature that shock the conscience.
Cleary Gottlieb’s report also identified potential misconduct by several current FDIC executives.
Cleary Gottlieb did not make any finding as to the merits of these allegations, as full investigations of specific allegations were beyond the scope of its mandate. Instead, recognizing that management could not investigate itself, Cleary Gottlieb recommended that these allegations, and any other allegations of misconduct by FDIC executives, be investigated by independent third-party firms.1
After raising concerns internally about the FDIC's lack of progress on this recommendation, on July 19, I circulated among the Board members a proposal to establish a committee modeled on the Special Committee that oversaw Cleary Gottlieb's review and task that committee with developing a plan for investigations by outside investigators of the Cleary Gottlieb-identified allegations of misconduct by FDIC executives and any other existing or future allegations.
Over the last month and a half, Vice Chairman Hill and I have engaged in lengthy discussions and even debates with the other Board members, including at two Board meetings that were closed to the public, to persuade at least one of the other Board members to support a consensus approach.
Tonight, the Board voted down my proposal. My proposal (which can be read here) would have just replicated the same committee structure that successfully and quickly oversaw Cleary Gottlieb's review, tasked that committee with retaining and overseeing outside investigators, and directed Cleary Gottlieb to provide all information relevant to potential executive misconduct to those outside investigators, subject of course to Cleary Gottlieb first obtaining the consent of individuals who provided hotline information or interview information to the sharing of that information with the outside investigators.
Instead, the Board adopted over Vice Chairman Hill and my objections a process to explore whether the National Credit Union Administration ("NCUA"), the Government Services Administration ("GSA"), or perhaps another to-be-specified regulator might agree to hopefully, eventually oversee investigations by outside investigators of potential executive misconduct on behalf of the FDIC.
The problems with the Board majority’s approach are many. But the most fundamental problem is the limitations on the investigations, both with respect to the information provided to the investigators and the triggers for an investigation.
The universe of information available to inform the investigations into potential executive misconduct can be grouped into four categories: (i) information relating to potential executive misconduct that Cleary Gottlieb received through its hotline ("hotline information"); (ii) information relating to potential executive misconduct that Cleary Gottlieb received through interviews of current and former FDIC personnel ("interview information"); (iii) information relating to potential executive misconduct that was obtained by Cleary Gottlieb from FDIC records, such as emails, Teams messages and other texts, EEO and other complaints, reports of investigations, and settlement agreements ("collected FDIC records"); and (iv) other information relating to potential executive misconduct that was memorialized in memoranda and other work product of Cleary Gottlieb ("Cleary Gottlieb information").
Importantly, the hotline information and the interview information were received by Cleary Gottlieb subject to its agreement to maintain the confidentiality of that information. My sense is that there is a strong Board consensus in favor of protecting the confidentiality of that information.
Under the approach adopted today, none of this information will be provided to the outside investigators unless an individual takes additional steps to consent to Cleary Gottlieb sharing information relevant to the individual’s allegations with the outside investigators. The problem with that approach is that only the hotline information and the interview information are subject to an agreement to maintain the confidentiality of that information.
My proposal would have instead made a larger set of information available to the outside investigators—specifically, the collected FDIC records and the Cleary Gottlieb information, along with the hotline information and interview information that the reporting individuals have consented to Cleary Gottlieb sharing with the outside investigators. My proposal also would have made the collected FDIC records and the Cleary Gottlieb information available to the outside investigators from the beginning, instead of piecemeal, if at all, as individuals affirmatively opted into Cleary Gottlieb sharing information with the outside investigators. By providing the outside investigators more information and sooner, my proposal would have meant more investigations and better-informed investigations.
With respect to the triggers for an investigation, under the approach adopted today outside investigators will investigate an allegation of executive misconduct only if an individual gives up their anonymity and submits an allegation to the outside investigator. Under my proposal, the outside investigators would be required to use all of the information made available to it, including the collected FDIC records, to identify potential executive misconduct that has not been reported to the outside investigators and then to investigate that potential executive misconduct. This difference would mean that investigations would be possible even if an individual does not wish to give up their anonymity or re-live the trauma of reporting by re-submitting an allegation to the outside investigators (provided of course that the individual has consented to Cleary Gottlieb sharing their hotline information or interview information with the outside investigators).
Trying to put this more simply, under the approach adopted today, some executive misconduct likely won't be investigated, or won’t be investigated using all available information, because the victim won’t want to give up their anonymity and re-live the trauma of the reporting process by re-submitting their allegation to the outside investigators, because investigators are never given the collected FDIC records or Cleary Gottlieb information relevant to that executive misconduct, or because the third-party investigators are not tasked with using all of the available information to identify other potential executive misconduct that, while perhaps of an obviously egregious nature, has nonetheless not been the subject of an allegation filed with the outside investigators.
To be more concrete, if also blunt, the debate here comes down largely to the allegations against the Chairman. Cleary Gottlieb's report describes a May 2023 meeting at which the Chairman allegedly "'went on a rant' for 45 minutes directing his 'ire' at a particular individual, and also threatened that he could 'fire' or 'reassign' anybody he wanted."2 Importantly, that incident is corroborated by contemporaneous Teams messages. Outside investigators potentially could fully investigate this incident using those Teams messages and other collected FDIC records, all the while still protecting the anonymity of the victims and others at the meeting. But under the approach adopted today, those collected FDIC records would not be provided to the outside investigators, and this incident would not be investigated, unless an individual who was at that meeting gives up their anonymity and submits an allegation to the outside investigators.
There are also other incidents involving the Chairman that potentially could be investigated using collected FDIC records and the Cleary Gottlieb information. The November 2020 meeting at which the Chairman allegedly "lost it" and "was absolutely irate and attacked us" also was corroborated by contemporaneous Teams messages. There are also other incidents involving the Chairman not described in Cleary Gottlieb's report. Even if well-evidenced by information not protected by Cleary Gottlieb's promise of confidentiality, none of these incidents will be investigated unless an employee re-submits an allegation to the outside investigators.
This outcome—the FDIC potentially not investigating all potential executive misconduct of which it has been made aware—seems an unacceptable outcome to me. But perhaps that's the actual intent of the approach adopted today.3
This is all of course more complicated than it needs to be. My proposal was simple. I've still not yet heard a compelling argument against my proposal. There is instead apparently a strongly felt desire among some to avoid a second report documenting misconduct by FDIC executives.
Finally, it's probably worth briefly noting that there are still other significant problems with the approach adopted today. The complexity of the approach adopted today, especially the reliance on NCUA, GSA, or another regulator as a middleman, poses significant and unnecessary execution risk and provides the Board with little control over, or assurances as to, the competence of the outside investigators or the quality of their work. Even if feasible, the approach adopted today could lead to lengthy and unnecessary delays to negotiate contracts with the middleman and then that middleman's outside investigators; indeed we are already aware of some practical impediments to those negotiations. The approach adopted today would require individuals to take steps to affirmatively elect to share information with the outside investigators; in my view, Cleary Gottlieb should simply reach out to each individual who provided hotline information or interview information relevant to potential executive misconduct and ask whether they want that information shared with the outside investigators.
But those details, while important, shouldn't distract from the real issue here. According to a recent poll by the union representing FDIC employees, 68 percent of FDIC employees have no confidence in the Chairman or the executive team's ability to correct the FDIC environment. Part of that is surely because the FDIC employees have seen no one held accountable for the extensive wrongdoing documented in Cleary Gottlieb's report. Despite Vice Chairman Hill and my efforts, the Board continues to struggle to commit itself to accountability. We will continue to struggle with accountability until we have a fresh start at the FDIC.
- 1
Specifically, the Cleary Report recommended that investigations into "[a]ny allegations against the Chairperson, individuals who directly report to the Chairperson, and Executive Managers relating to violations of the Anti-Harassment Policy, as well as any newly created Anti-Fraternization Policy and Anti-Retaliation Policy should be conducted by third-party firms that have not previously completed significant work in conjunction with senior FDIC executives." Cleary Report at 171.
- 2
Cleary Report at 94.
- 3
Some might argue that the intent of the approach adopted today is otherwise. In response to past assertions along these lines, I’ve suggested adding to the approach adopted today the additional language below to clarify the intent. That suggestion has been rejected. To me, that is in itself important evidence of the intent and actual effect of the approach adopted today.
My proposed clarifying edits:
BE IT FURTHER RESOLVED, that the Legal Division shall (i) cause Cleary Gottlieb to transmit to a third-party firm retained pursuant to this resolution all information relating to any allegation of a violation of a Covered Policy by an FDIC Executive with respect to which information the individual who reported that information has consented to the transmission of that information to a third-party firm, as well as any other information relating to any such allegation that was obtained by Cleary Gottlieb through means other than its hotline, and (ii) ensure the terms of engagement with either NCUA or GSA AAS, as applicable, provide that a third-party firm will use that hotline and other information to identify potential violations by FDIC Executives of the Covered Policies (including potential violations that have not been reported to the third-party firm by another source) and to investigate those potential violations to the extent feasible and permitted by law.