UID/Aadhaar
Biometric profiling, including DNA, is dehumanising -Part 3

Citizens would face an unprecedented onslaught from the provisions of DNA Profiling Bill and other related surveillance measures being bulldozed by unregulated and ungovernable technology. Biometric profiling of any sort is dehumanising

The dangers of trusting identification technologies for determining social policies is bound to be consequential in a situation where “[A] warrant requirement will not make much difference to a society that, under the sway of a naive and discredited theory of genetic determinism, is willing to lock people away on the basis of their genes.”

 

The 21st century ideology of genetic determinism is being promoted through biometric identification. Such identification includes DNA profiling. DNA profiling is ‘undesirable particularly as forensic DNA developments are intertwined with significant changes in legislation and contentious issues of privacy, civil liberty and social justice.’ The argument which is often mouthed in defence of biometric National Population Register (NPR) and unique identification (UID)/Aadhaar number is that it is meant for social security akin to social security number in the US, which incidentally is not based on biometric data. This must be seen along with a similar argument being advanced for a DNA profile. They say such profiling is required because it “is very much like a social security number—though it is longer and is assigned by chance, not by the federal government”. Clearly, the ramifications of automatic profiling, tracking and surveillance is unfolding and trapping unsuspecting citizens in its ambit.

   

The 58-page Draft Human DNA Profiling Bill, 2012 which is the revised version of the 35-page DNA Profiling Act, 2007 appears linked to the emergence of a surveillance and database state using Union Home Ministry’s biometric NPR, National Intelligence Grid (NATGRID), National Counter Terrorism Centre (NCTC), Union Surface Transport Ministry’s Radio Frequency Identification (RFID), Union Finance Ministry’s National Information Utility, Planning Commission’s Unique Identification /Aadhaar, Union Rural Development Ministry’s Land Titling Bill, World Bank’s e-Transform Initiative, North Atlantic Treaty Organisation (NATO)’s identification policy and Sam Pitroda’s Public Information Infrastructure and Innovations etc.

 

Having initiated collection of biometric data like fingerprints and iris scan for NPR and UID number, the Draft Human DNA Profiling Bill takes the next step and provides for procurement of “intimate body sample” which means a sample of blood, semen or any other tissue, fluid, urine, or pubic hair, a dental impression; or a swab taken from a person’s body orifice other than mouth obtained through “intimate forensic procedure”.

 

A paper ‘Prelude to a Miss: A Cautionary Note against Expanding DNA Databanks in the Face of Scientific Uncertainty’ by Jennifer Sue Deck wherein a text of Office of Technology Assessment, US Congress, ‘Genetic Witness: Forensic Uses of DNA Tests’ reads: “DNA fingerprinting is all but foolproof, but some fool is going to use it”. This is apt about all kinds of biometric identification.

    

Profiling based on Deoxyribose Nucleic Acid (DNA) is aimed at examination of human biological material acquired through intimate forensic procedure. This biological material is coded with "the past history and thus dictate the future of an individual's racial and genealogical makeup, and influence an individual's medical and psychological makeup."

 

The intimate forensic procedure means the following forensic procedures, namely:-

(a)An external examination of the genital or anal area, the buttocks and also breasts in the case of a female breast;

(b) Taking of a sample of blood;

(c) Taking of a sample of pubic hair;

(d) Taking of a sample by swab or washing from the external genital or anal area, the buttocks and also breasts in the case of a female;

(e) Taking of a sample by vacuum suction, by scraping or by lifting by tape from the external genital or anal area, the buttocks and also breasts in the case of a female;

(f) Taking of a dental impression;

(g) Taking of a photograph or video recording of, or an impression or cast of a wound from, the genital or anal area, the buttocks and also breasts in  the case of a female.

 

DNA Profiling is aimed at regulating the use of DNA analysis of body substance profiles and making provision for establishment of DNA Profiling Board consisting of eminent scientists, administrators and law enforcement officers to lay down standards for laboratories, collection of body substances, custody trail from collection to reporting and establishment of a databank and to create policies for use and access to information from such data bank, appointment of a DNA Databank Manager to supervise, execute and maintain the databank and for matters connected therewith.

 

A decision of the European Court of Human Rights (ECHR) about violation of the right to privacy and family life by DNA profile retention in criminal justice databanks is relevant here. The case was heard publicly on 27 February 2008, and the unanimous decision of 17 judges was delivered on 4 December 2008. The court found that the “blanket and indiscriminate nature” of the power of retention of the fingerprints, cellular samples, and DNA profiles of persons suspected but not convicted of offenses, failed to strike a fair balance between competing public and private interests and ruled that the United Kingdom had “overstepped any acceptable margin of appreciation” in this regard. This was before David Cameron became the Prime Minister in May 2011 defeating Tony Blair's Labour Party which had introduced identity card legislation and compulsory DNA recording.

 

The technique of DNA profiling was pioneered in the UK and it was the first nation to establish a criminal justice DNA databank. The decision is non-appealable. Unmindful of this, in India National DNA databank is being proposed.

 

Once the DNA databank is in place the enlargement of scope for its new predictive uses cannot be ruled out given scientific advancements underway. In such a situation a readymade DNA based inferences adversely impacts impartiality of the criminal justice system and other systems become questionable. Contrary to the existing legal provisions under Census Act and Citizenship Act, the Bill states that the DNA data will also be used for the "creation and maintenance" of population statistics that can be used for "identification, research, protocol development or quality control".

 

The Bill once it becomes a law will grant the authority to collect vast amount of sensitive DNA data of citizens merely on the ground of suspicion in a criminal case. The data will be held till the person is cleared by court. Under the Identification of Prisoner Act, there is a reference of collection of sensitive biometric data like fingerprints wherein biometric data of prisoners can be collected that too with the permission of a Magistrate but on acquittal the biometric data is required to be destroyed. The Draft Human DNA Profiling Bill is far more regressive than the colonial law. The provision of collection of citizens DNA data in the Draft Bill for DNA Database in effect treats the citizens worse than prisoners.

  

The preamble to the Bill admits that "DNA analysis offers sensitive information which, if misused, can cause harm to a person or society". It proposes the creation of a National DNA Data Bank which will be headed by an officer in the rank of a Joint Secretary to the Government of India. There is a section in the Bill that allows for "volunteers" to give their DNA profiles. It is quite strange that "volunteers" are expected to share their sensitive data with the government. It is noteworthy that Unique Identification Authority of India (UIDAI) too had initially claimed that enrolment based on biometric data is voluntary. Subsequent events and official documents reveal that it is explicitly mandatory by implication.

 

The DNA Data Bank like other databases like Centralized Identity Data Register (CIDR) of UID/Aadhaar and NPR are saleable commodities but the Bill provides for the imprisonment of a few months or a fine of Rs50,000 for "misuse" of the DNA profiles. The Department of Biotechnology (DBT), Union Ministry of Science and Technology have circulated this Bill to other ministries for their inputs.

 

In all likelihood DNA Data Bank, CIDR, NPR and criminal database will get converged in furtherance of World Bank’s e-Transform Initiative unfolding in partnership with six transnational companies namely, Gemalto, IBM, L-1 Identity Solutions, Microsoft and Pfizer and two national governments of France and South Korea. Such convergence poses a threat to minorities and political opponents whose targeting is imminent.

 

It may be noted that US Genetic Information Non-discrimination Act (GINA), 2008 prohibits US insurance companies and employers from discriminating on the basis of information derived from genetic tests. The necessity of such law underlines that genetic information like DNA facilitates discrimination.

 

Manifesto of biometric identification promoters will read like the 1,500 page regressive manifesto titled “2083: A European Declaration of Independence” brought out by Norwegian gunman and neo-Crusader, Anders Behring Breivik who carried out the heinous attacks on his fellow citizens. It refers to the word “identity” over 100 times, “unique” over 40 times and “identification” over 10 times. There is reference to “state-issued identity cards”, “converts’ identity cards”, “identification card”, “fingerprints”, “DNA” etc as well in this manifesto.

 

These words and their imports merit attention in order to safeguard human rights of present and future generation of citizens which faces an unprecedented onslaught from the provisions of DNA Profiling Bill and other related surveillance measures being bulldozed by unregulated and ungovernable technology. Biometric profiling of any sort is dehumanising.

 

You may also want to read…
 

Why biometric identification of citizens must be resisted? Part I

 

Biometric identification is modern day enslavement -Part II

 

(Gopal Krishna is member of Citizens Forum for Civil Liberties (CFCL), which is campaigning against surveillance technologies since 2010)

User

COMMENTS

Shashikant Chaudhari

2 years ago

If biometric & genetic data is not to be collected,,,which is better system to prove sexual crimes and stolen identity.There is no remedy.If we decide CCTV footage is must to link Person to link the crime we must have full citizen data.if we want to stop crimes of sex,we must have DNA profile of citizens as well as illegal immigrants and all foreign national present in country at any given time.To link suspects to crime it is eminent.

Ravi S

3 years ago

Subsidized Diesel:

India spends about Rs. One Trillion (Rs. One Lakh Crore) on petroleum subsidy alone. Diesel is highly subsidized. So should the general public pay for diesel cars of rich people? There has been lot of hue & cry on subsidy for kerosene and LPG, then why not on subsidized diesel for the rich?
We should allow diesel subsidy to some vehicles (truck, tractor) only with limits based on Aadhaar number of the owner.

REPLY

Shashikant Chaudhari

In Reply to Ravi S 2 years ago

But' aadhaar' itself is under review by Supreme Court.How atruck owner will be stopped from black marketing subsidized Diesel,,Aadhaar is best way out but some unscrupuous elements are against it & whole nation.

Mumbai One

In Reply to Ravi S 3 years ago

Well...well...well!
Looks like the PR of UIDAI ( or pvt contractor, who may have suffered from such articles) is on a big HIT job today.

And Thanks for revealing your true intentions to 'limit' or 'control' benefits using the UID.
Now, using your logic, kindly guide us, who will decide the 'quota' of diesel for a poor farmer? And how it will be distinguished from the rich farmer?

Anyway...just give answers to two simple questions...
1. Who owns the UID database? Is it the Indian govt or private agencies/firms?
2. Which is the law that regulates the collection of biometric data, and Aadhaar itself? Don't hide behind the lapsed executive order as any such thing become irrelevant after six months.

Ravi S

3 years ago

Who is afraid of Aadhaar & Why?

As the public databases are getting inter-linked one by one thru Aadhaar Number in various States (particularly Delhi, Maharashtra, Andhra), we see the following effects:
1. Middlemen & Officials are finding difficult to continue with corruption in public welfare pensions, scholarships, public health, NREGA, subsidy on PDS Ration, Kerosene, LPG etc.
2. Ineligible, duplicate and fictitious beneficiaries are getting eliminated from public welfare pensions, scholarships, public health, NREGA, subsidy on PDS Ration, Kerosene, LPG etc.
3. Corrupts will find difficult to buy & sell Benami land & building (i.e.under fictitious name).
4. Corrupts will find difficult to open & operate Benami companies for money-laundering.
5. Corrupts will find difficult to open & operate Benami bank accounts for keeping black-money.
6. Tax-evaders will find difficult to evade taxes.
7. Impersonation & proxy will be difficult to commit.
8. Criminals & Terrorists will get detected and tracked thru inter-linked databases of mobile phone, bank account, travel documents etc.
9. Illegal Immigrants will get detected and tracked thru inter-linked databases of mobile phone, bank account, travel documents etc. They will have no place to hide on Indian soil.
10. It will get difficult for Criminals to hide as records are getting accessible to Police from any State of India.
11. It will get difficult to obtain another new Driving License and Arms License from another State once it got impounded.
12. Fraudsters will not be able to steal Provident Fund money.
13. Onion Hoarders will get tracked easily.
14. Dummy candidates will not be able to write competitive exams for others for the sake of money.
15. Ineligible people will not be able to misuse the certificates of income, domicile, education degrees and caste to deprive the eligible people.

REPLY

Shashikant Chaudhari

In Reply to Ravi S 2 years ago

Dear Ravi,Aadhaar is good ,,Why any body should bother who is holding the data,India or some ohers,we still live on foreign aids.some people are always against good projects so they take the case to court to hinder the progress.Personally i dont mind sharing & holding data by Aadhaar or private firms.I am a common man ,living on pension.& by collecting my biometric data,Medical Data,DNA profiling by CIA,,if my country is getting benefit,,why shouldnt I

Mumbai One

In Reply to Ravi S 3 years ago

Well...well...well!
Looks like the PR of UIDAI ( or pvt contractor, who may have suffered from such articles) is on a big HIT job today.

Anyway...just give answers to two simple questions...
1. Who owns the UID database? Is it the Indian govt or private agencies/firms?
2. Which is the law that regulates the collection of biometric data, and Aadhaar itself? Don't hide behind the lapsed executive order as any such thing become irrelevant after six months.

Ravi S

3 years ago

Who is afraid of Aadhaar & Why?

As the public databases are getting inter-linked one by one thru Aadhaar Number in various States (particularly Delhi, Maharashtra, Andhra), we see the following effects:
1. Middlemen & Officials are finding difficult to continue with corruption in public welfare pensions, scholarships, public health, NREGA, subsidy on PDS Ration, Kerosene, LPG etc.
2. Ineligible, duplicate and fictitious beneficiaries are getting eliminated from public welfare pensions, scholarships, public health, NREGA, subsidy on PDS Ration, Kerosene, LPG etc.
3. Corrupts will find difficult to buy & sell Benami land & building (i.e.under fictitious name).
4. Corrupts will find difficult to open & operate Benami companies for money-laundering.
5. Corrupts will find difficult to open & operate Benami bank accounts for keeping black-money.
6. Tax-evaders will find difficult to evade taxes.
7. Impersonation & proxy will be difficult to commit.
8. Criminals & Terrorists will get detected and tracked thru inter-linked databases of mobile phone, bank account, travel documents etc.
9. Illegal Immigrants will get detected and tracked thru inter-linked databases of mobile phone, bank account, travel documents etc. They will have no place to hide on Indian soil.
10. It will get difficult for Criminals to hide as records are getting accessible to Police from any State of India.
11. It will get difficult to obtain another new Driving License and Arms License from another State once it got impounded.
12. Fraudsters will not be able to steal Provident Fund money.
13. Onion Hoarders will get tracked easily.
14. Dummy candidates will not be able to write competitive exams for others for the sake of money.
15. Ineligible people will not be able to misuse the certificates of income, domicile, education degrees and caste to deprive the eligible people.

REPLY

Mumbai One

In Reply to Ravi S 3 years ago

Well...well...well!
Looks like the PR of UIDAI ( or pvt contractor, who may have suffered from such articles) is on a big HIT job today.

Anyway...just give answers to two simple questions...
1. Who owns the UID database? Is it the Indian govt or private agencies/firms?
2. Which is the law that regulates the collection of biometric data, and Aadhaar itself? Don't hide behind the lapsed executive order as any such thing become irrelevant after six months.

Ravi S

3 years ago

Privacy or subversion?

Some privacy champions raise the privacy issue which is irrelevant in a poor country like India where about 750 million people starve for 2-square meal, where illiteracy is high, where religion & caste-based-bias continues, rampant corruption & exploitation exists. They forget that India has a law called Information Technology Act 2000. It has been in existence since year 2000 that protects Aadhaar information along with other laws.

Aadhaar registration collects biometric data and bare minimum information (proof of identity, age, and residence) through enrollment form. Peruse the Enrollment-Form with data fields on page-1 and instructions on page-2. No profiling information is collected, like religion, caste, income, property-holding, education etc.

Privacy issues and risks equally apply to information and data (with or without biometrics) provided by people to census office, tax office, passport office, driving license, vehicle registration, land and building registration, registration of birth, marriage and death, employers (current, past and prospective), banks, credit card companies, insurance companies, telephone service provider, television service provider, internet service provider, internet services (email, video, social media, search engine, chat, voice, file-storage and transfer etc.), registration at school/college, marriage bureaus, post-office and courier services, hospital registration and medical records, visa of US and UK etc.

In India, government departments, public and private sectors have been using biometrics (fingerprints and face photo) for years, decades and centuries in some or all offices. Examples of fingerprints usage are: Land and building registration (since British era), Defense departments (fingerprints as service record of civilian as well as service personnel since British era to modern day, also for access and attendance now), Planning Commission of India (for access and attendance), census office (for compulsory NPR), Passport, RTO (for driving license), insurance companies, IT, BPO and healthcare companies (for access and attendance), visa of US and UK etc. Aadhaar does not violate any privacy or fundamental right.

India has seen anti-modernization protests in the past too. Some people caused bandh & hartals in protest against modernization and computerization of Banking & Rail-ticket 25 years ago. Today people are very happy to enjoy bank ATM and to book rail-ticket from anywhere. Then they had argued that paper records were better than computers. Now those protesters never want to reveal that they ever protested against computerization.
Ironically, there is no opposition to collection of biometric data at other points of services. People stand in long queues to imprint biometrics for obtaining Indian passport, US, UK visa. The attendance & access of most of the IT & ITeS companies are biometric based. The attendance & access of the Planning Commission of India is also biometric based. People have been imprinting all ten-fingers plus details of eyes and other identification marks on body on the first day of joining employment in Defense department of India (civilian as well as service personnel) since British rule of India. Yet one never opposed all that.
The use of electronic devices provides no privacy; such as mobile phone, internet (particularly social network media), email, television, bank card, traffic camera. At any moment the government and the service provider knows of geographical location of people, of conversation on phone, with whom, what we are reading, writing or watching on internet, and what TV channel we are watching, when and for how long. All this is done under electronic surveillance thru device identifiers like IMEI, IP address, GPS etc.

Embassies have switched over to mechanical type-writers in 2013 after CIA worker Snowden’s disclosures. Government also knows our movements thru the traffic cameras on roads, our vehicle number plate, our face etc.
Despite this knowledge, the privacy champions do not want to stop using mobile phones, internet, TV etc. Their sole objective is subversion of Aadhaar, nothing else, and they will not succeed because Aadhaar has already crossed the critical-mass on 15-Aug-2013 by enrolling about 450 million people, assigning 400 million Numbers and linking 30 million bank accounts for Direct Benefit Transfer across many states. And as of November-2013, 500 million Aadhaar have been assigned.

Opponents of Aadhaar believe that snooping / surveillance cannot be done without Aadhaar. Then how Narendra Modi did the snooping of a girl in 2009 when Aadhaar did not exist? Intention of the powerful matters a lot!

https://en.wikipedia.org/wiki/Surveillance
http://edition.cnn.com/2013/07/17/opinio...
http://www.scu.edu/ethics/publications/s...
http://www.wisegeek.com/what-is-electron...
http://www.ico.org.uk/for_organisations/...

REPLY

Mumbai One

In Reply to Ravi S 3 years ago

Well...well...well!
Looks like the PR of UIDAI ( or pvt contractor, who may have suffered from such articles) is on a big HIT job today.

Anyway...just give answers to two simple questions...
1. Who owns the UID database? Is it the Indian govt or private agencies/firms?
2. Which is the law that regulates the collection of biometric data, and Aadhaar itself? Don't hide behind the lapsed executive order as any such thing become irrelevant after six months.

Ravi S

3 years ago


Opponents of Aadhaar believe that snooping / surveillance cannot be done without Aadhaar. Then how Narendra Modi did the snooping of a girl in 2009 when Aadhaar did not exist? Intention of the powerful matters a lot!

REPLY

Mumbai One

In Reply to Ravi S 3 years ago

Well...well...well!
Looks like the PR of UIDAI ( or pvt contractor, who may have suffered from such articles) is on a big HIT job today.

Anyway...just give answers to two simple questions...
1. Who owns the UID database? Is it the Indian govt or private agencies/firms?
2. Which is the law that regulates the collection of biometric data, and Aadhaar itself? Don't hide behind the lapsed executive order as any such thing become irrelevant after six months.

Ravi S

3 years ago

That is why half the nations of the world have National ID for residents.

REPLY

Mumbai One

In Reply to Ravi S 3 years ago

Well...well...well!
Looks like the PR of UIDAI ( or pvt contractor, who may have suffered from such articles) is on a big HIT job today.

Other nations dont use biometric profiling for NID, for your kind info.

Anyway...just give answers to two simple questions...
1. Who owns the UID database? Is it the Indian govt or private agencies/firms?
2. Which is the law that regulates the collection of biometric data, and Aadhaar itself? Don't hide behind the lapsed executive order as any such thing become irrelevant after six months.

mediavigil

3 years ago

Question that emerges is- will the companies succeed in its design to capture our biological data with the help of the Govt without robust political resistance?

NY Fed fired examiner who took on Goldman Sachs

Lawyer Carmen Segarra said she was pressured to change her finding that the way Goldman Sachs managed conflicts of interest was flawed

A version of this story was co-published with The Washington Post.
 

In the spring of 2012, a senior examiner with the Federal Reserve Bank of New York determined that Goldman Sachs had a problem.
 

Under a Fed mandate, the investment banking behemoth was expected to have a company-wide policy to address conflicts of interest in how its phalanxes of dealmakers handled clients. Although Goldman had a patchwork of policies, the examiner concluded that they fell short of the Fed’s requirements.
 

That finding by the examiner, Carmen Segarra, potentially had serious implications for Goldman, which was already under fire for advising clients on both sides of several multibillion-dollar deals and allegedly putting the bank’s own interests above those of its customers. It could have led to closer scrutiny of Goldman by regulators or changes to its business practices.
 

Before she could formalize her findings, Segarra said, the senior New York Fed official who oversees Goldman pressured her to change them. When she refused, Segarra said she was called to a meeting where her bosses told her they no longer trusted her judgment. Her phone was confiscated, and security officers marched her out of the Fed’s fortress-like building in lower Manhattan, just 7 months after being hired.
 

“They wanted me to falsify my findings,” Segarra said in a recent interview, “and when I wouldn’t, they fired me.”
 

Today, Segarra filed a wrongful termination lawsuit against the New York Fed in federal court in Manhattan seeking reinstatement and damages. The case provides a detailed look at a key aspect of the post-2008 financial reforms: The work of Fed bank examiners sent to scrutinize the nation’s “Too Big to Fail” institutions.
 

Takeaways
Former New York Fed examiner, Carmen Segarra, says she was fired after uncovering problems with Goldman Sachs' conflict-of-interest policy.
Segarra says her supervisors pressured her to falsify her findings that Goldman's policies were inadequate, and she refused.
Segarra and New York Fed colleagues recommended Goldman be downgraded because of deficient policies.
Segarra found that Goldman's efforts to wall off conflicts in a multi-billion dollar energy deal was full of holes

In hours of interviews with ProPublica, the 41-year-old lawyer gave a detailed account of the events that preceded her dismissal and provided numerous documents, meeting minutes and contemporaneous notes that support her claims. Rarely do outsiders get such a candid view of the Fed’s internal operations.
 

Segarra is an expert in legal and regulatory compliance whose previous work included jobs at Citigroup and the French bank Société Générale. She was part of a wave of new examiners hired by the New York Fed to monitor systemically important banks after passage in July 2010 of the Dodd-Frank regulatory overhaul, which gave the Fed new oversight responsibilities.
 

Goldman is known for having close ties with the New York Fed, its primary regulator. The current president of the New York Fed, William Dudley, is a former Goldman partner. One of his New York Fed predecessors, E. Gerald Corrigan, is currently a top executive at Goldman. At the time of Segarra’s firing, Stephen Friedman, a former chairman of the New York Fed, was head of the risk committee for Goldman’s board of directors.
 

In an email, spokesman Jack Gutt said the New York Fed could not respond to detailed questions out of privacy considerations and because supervisory matters are confidential. Gutt said the Fed provides “multiple venues and layers of recourse for employees to freely express concerns about the institutions it supervises.”
 

“Such concerns are treated seriously and investigated appropriately with a high degree of independence,” he said. “Personnel decisions at the New York Fed are based exclusively on individual job performance and are subject to thorough review. We categorically reject any suggestions to the contrary.”
 

Dudley would not have been involved in the firing, although he might have been informed after the fact, according to a Fed spokesman.
 

Goldman also declined to respond to detailed questions about Segarra. A spokesman said the bank cannot discuss confidential supervisory matters. He said Goldman “has a comprehensive approach to addressing conflicts through firm-wide and divisional policies and infrastructure” and pointed to a bank document that says Goldman took recent steps to improve management of conflicts.
 

Segarra’s termination has not been made public before now. She was specifically assigned to assess Goldman’s conflict-of-interest policies and took a close look at several deals, including a 2012 merger between two energy companies: El Paso Corp. and Kinder Morgan. Goldman had a $4 billion stake in Kinder Morgan while also advising El Paso on the $23 billion deal.
 

Segarra said she discovered previously unreported deficiencies in Goldman’s efforts to deal with its conflicts, which were also criticized by the judge presiding over a shareholder lawsuit concerning the merger.
 

Her lawsuit also alleges that she uncovered evidence that Goldman falsely claimed that the New York Fed had signed off on a transaction with Santander, the Spanish bank, when it had not. A supervisor ordered her not to discuss the Santander matter, the lawsuit says, allegedly telling Segarra it was “for your protection.”
 

‘Eyes Like Saucers’
 

The New York Fed is one of 12 regional quasi-private reserve banks. By virtue of its location, it supervises some of the nation’s most complex and important financial institutions. After the 2008 financial crisis, disparate voices pointed to failures of enforcement by the New York Fed as a key reason banks took on too much risk.
 

Even Fed officials acknowledged shortcomings. After Dodd-Frank, new examiners like Segarra, called "risk specialists," were hired for their expertise. They were in addition to other Fed staffers, dubbed "business line specialists," some of whom were already embedded at the banks.
 

Segarra believed she had found the perfect home when she joined the New York Fed's legal and compliance risk specialist team in October 2011. It was a prestigious job, insulated from business cycles, where she could do her part to prevent another financial meltdown.
Her skills, honed at Harvard, Cornell Law School and the banks where she had worked, consisted of helping to create the policies and procedures needed to meet government financial regulations.
 

As part of their first assignment, Fed officials told Segarra's group of risk specialists to examine how the banks in which they were stationed complied with a Fed Supervision and Regulation Letter issued in 2008.
 

The letter, known as SR 08-08, emphasizes the importance of having company-wide programs to manage risks at firms like Goldman, which engage in diverse lines of business, from private wealth management and trading to mergers and acquisitions. The programs are supposed to be monitored and tested by bank compliance employees to make sure they are working as intended.
 

“The Fed recognized that financial conglomerates should act like truly combined entities rather than separate divisions or entities where one group has no idea what the other group is doing,” said Christopher Laursen, an economic consultant and former Federal Reserve employee who helped draft the supervisory letter.
 

In 2009, a review by the Fed had found problems with its efforts to ensure that banks followed the policy, which also says that bank compliance staffers must “be appropriately independent of the business lines” they oversee.
 

Segarra’s team included examiners placed at nine other “Too Big to Fail” banks, including Citigroup, JPMorgan Chase, Deutsche Bank and Barclays.
 

Segarra said her bosses told her to focus on Goldman’s conflict-of-interest policies. The firm had long been famous for trying to corral business from every part of the deals it worked on. “If you have a conflict, we have an interest,” is an oft-told joke on Wall Street about the firm’s approach.
 

The year before Segarra joined the Fed, for instance, Goldman had received a drubbing from the Securities and Exchange Commission and a Senate subcommittee over conflicts related to Abacus, a mortgage transaction the bank constructed. The SEC imposed a $550 million fine on the bank for the deal. A January 2011 Goldman report concluded that the firm should "review and update conflicts-related policies and procedures, as appropriate."
 

Initial meetings between the New York Fed and Goldman executives to review the bank’s policies did not go well, said Segarra, who kept detailed minutes.
 

When the examiners asked in November 2011 to see the conflict-of-interest policy, they were told one didn’t exist, according to the minutes. “It’s probably more than one document — there is no one policy per se,” the minutes recount one Goldman executive as saying.
 

The discussion turned to the name of the group that oversaw conflicts at Goldman: “Business Selection and Conflicts Resolution Group.” Segarra’s supervisor, Johnathon Kim, asked if business selection and conflicts were, in fact, two different groups. He was told they were not, the minutes show.
 

Goldman officials stated that the bank did not have a company-wide conflict-of-interest program, Segarra’s minutes show. Moreover, the head of the business selection and conflicts group, Gwen Libstag, who is not a lawyer, said in a subsequent meeting on Dec. 8 that she did not consider what her staff did a “legal and compliance function,” according to Segarra’s minutes.
 

“That’s why it’s called business selection,” another Goldman executive added. “They do both.”
 

Given the Fed’s requirements, the regulators were stunned, Segarra recounted in an interview. “Our eyes were open like saucers,” she said. “Business selection is about how you get the deal done. Conflicts of interest acknowledge that there are deals you cannot do.”
 

After the Dec. 8 meeting, the New York Fed’s senior supervising officer at Goldman, Michael Silva, called an impromptu session with Fed staffers, including Segarra. Silva said he was worried that Goldman was not managing conflicts well and that if the extent of the problem became public, clients might abandon the firm and cause serious financial damage, according to Segarra’s contemporaneous notes.
 

A Chinese Wall In Their Heads
 

As part of her examination, Segarra began making document requests. The goal was to determine what policies Goldman had in place and to see how they functioned in Kinder Morgan’s acquisition of El Paso. The merger was in the news after some El Paso shareholders filed a lawsuit claiming they weren’t getting a fair deal.
 

Although Segarra reported directly to Kim, she also had to keep Silva abreast of her examinations. Silva, who is also a lawyer, had been at the Fed for 20 years and previously had served as a senior vice president and chief of staff for Timothy Geithner while he was New York Fed president. As a senior vice president and senior supervisor, Silva outranked Kim in the Fed hierarchy.
 

Segarra said James Bergin, then head of the New York Fed’s legal and compliance examiners, noted at a November meeting that there was tension between the new risk specialists and old-guard supervisors at the banks. Segarra said the tension surfaced when she was approached in late December by a Fed business line specialist for Goldman, who wanted to change Segarra’s Dec. 8 meeting minutes.
 

Segarra told her Fed colleague that she could send any changes to her. When Segarra next met with her fellow risk specialists, she said she told them what had transpired. They told her that nobody should be allowed to change her meeting minutes because they were the evidence for her examination.
 

Around that time, Silva had a meeting with Segarra, she said. According to her notes, Silva warned her that sometimes new examiners didn’t recognize how they are perceived and that those who are taken most seriously are the most quiet. Segarra took it as more evidence of tension between the two groups of regulators.
 

Bergin, Silva and Kim did not respond to requests for comment.
 

By mid-March 2012, Goldman had given Segarra and a fellow examiner from the New York State Banking Department documents and written answers to their detailed questions. Some of the material concerned the El Paso-Kinder Morgan deal.
 

Segarra and other examiners had been pressing Goldman for details about the merger for months. But it was from news reports about the shareholder lawsuit that they learned the lead Goldman banker representing El Paso, Steve Daniel, also had a $340,000 personal investment in Kinder Morgan, Segarra said.
 

Delaware Chancery Court Judge Leo Strine had issued a 34-page opinion in the case, which eventually settled. The opinion castigated both El Paso’s leadership and Goldman for their poor handling of multiple conflicts of interest.
 

At the New York Fed, Goldman told the regulators that its conflict-of-interest procedures had worked well on the deal. Executives said they had “exhaustively” briefed the El Paso board of directors about Goldman’s conflicts, according to Segarra’s meeting minutes.
 

Yet when Segarra asked to see all board presentations involving conflicts of interest and the merger, Goldman responded that its Business Selection and Conflict Resolution Group “as a general matter” did not confer with Goldman’s board. The bank’s responses to her document requests offered no information from presentations to the El Paso board discussing conflicts, even though lawsuit filings indicate such discussions occurred.
 

Goldman did provide documents detailing how it had divided its El Paso and Kinder Morgan bankers into “red and blue teams.” These teams were told they could not communicate with each other — what the industry calls a “Chinese Wall” — to prevent sharing information that could unduly benefit one party.
 

Segarra said Goldman seating charts showed that that in one case, opposing team members had adjacent offices. She also determined that three of the El Paso team members had previously worked for Kinder Morgan in key areas.
 

“They would have needed a Chinese Wall in their head,” Segarra said.
 

Pressure To Change Findings
 

According to Segarra’s lawsuit, Goldman executives acknowledged on multiple occasions that the bank did not have a firm-wide conflict-of-interest policy.
 

Instead, they provided copies of policies and procedures for some of the bank’s divisions. For those that did not have a division-wide policy, such as the investment management division, they offered what was available. The policy for the private banking group stated that employees shouldn’t write down their conflicts in “emails or written communications.”
 

“Don’t put that in an email in case we get caught?” Segarra said in an interview. “That’s a joke.”
 

Segarra said all the policies were missing components required by the Fed.
 

On March 21, 2012, Segarra presented her conclusion that Goldman lacked an acceptable conflict-of-interest policy to her group of risk specialists from the other “Too Big to Fail” banks. They agreed with her findings, according to Segarra and another examiner who was present and has requested anonymity.
 

Segarra’s group discussed possible sanctions against the bank, but the final decision was up to their bosses. A summary sheet from the meeting recommended downgrading Goldman from “satisfactory” to “fair” for its policies and procedures, the equivalent of a “C” in a letter grade.
 

A week later, Segarra presented her findings to Silva and his deputy, Michael Koh, and they didn’t object, she said. Reached by ProPublica, Koh declined to comment.
 

In April, Goldman assembled some of its senior executives for a meeting with regulators to discuss issues raised by documents it had provided. Segarra said she asked Silva to invite officials from the SEC, because of what she had learned about the El Paso-Kinder Morgan merger, which was awaiting approval by other government agencies.
 

Segarra said she and a fellow examiner from New York state’s banking department had prepared 65 questions. But before the meeting, Silva told her she could only ask questions that did not concern the El Paso-Kinder Morgan merger, she said.
 

Nonetheless, SEC officials brought it up. Goldman executives said they had no process to check the personal holdings of bankers like Steve Daniel for possible conflicts, according to notes Segarra took at the time. Asked by Segarra for Goldman’s definition of “conflicts,” the bank’s general counsel, Greg Palm, responded that it could be found in the dictionary, she said.
 

“What they should have is an easy A-B-C approach to how to manage conflicts,” Segarra said. “But they couldn’t even articulate what was a conflict of interest.”

Goldman declined a request to make Palm available for comment.
 

As the Goldman examination moved up the Fed’s supervisory chain, Segarra said she began to get pushback. According to her lawsuit, a colleague told Segarra in May that Silva was considering taking the position that Goldman had an acceptable firm-wide conflict-of-interest policy.
 

Segarra quickly sent an email to her bosses reminding them that wasn’t the case and that her team of risk specialists was preparing enforcement recommendations.
 

In response, Kim sent an email saying Segarra was trying to “front-run the supervisory process.” Two days later, a longer email arrived from Silva, stating that “repeated statements that you have made to me that [Goldman] does not have a [conflict-of-interest] policy AT ALL are debatable at best, or alternatively, plainly incorrect.”
 

As evidence, Silva cited the 2011 Goldman report that called for a revamp of its conflict-of-interest procedures, as well as the company’s code of conduct — neither of which Segarra believed met the Fed’s requirements.
 

While not commenting on Goldman’s situation, Laursen, the consultant who helped draft the Fed policy, said the idea is to police conflicts across divisions. “It would need to be a high-level or firm-wide policy,” he said, that “would identify the types of things that should not occur and the processes and monitoring that make sure they don’t.”
 

In its email to ProPublica, Goldman cited a May report from its Business Standards Committee that says the company completed an overhaul of its business practices earlier this year that included new policies and training for managing conflicts.
 

Before Segarra could respond to Silva’s email, Koh summoned her to a meeting. For more than 30 minutes, he and Silva insistently repeated that they did not agree with her findings concerning Goldman, she said.
 

Segarra detailed all the evidence that supported her conclusion, she said. She offered to participate in a wider meeting with New York Fed personnel to discuss it further. Because Fed officials would ultimately have to ratify her conclusions, she let them know she understood that her findings were subject to change.
 

Silva and his deputy did not engage with her arguments during the meeting. Instead, they kept reiterating that she was wrong and should change her conclusions, she said.
 

Afterward, Segarra said she sent an email to Silva detailing why she believed her findings were correct and stating that she could not change them. There was just too much evidence to the contrary, she said in an interview.
 

Three business days later, Segarra was fired.
 

Segarra has no evidence that Goldman was involved. Silva told her that the Fed had lost confidence in her ability to follow directions and not jump to conclusions.
 

Today, Segarra works at another financial institution at a lower level than she feels her qualifications merit. She worries about the New York Fed’s ability to stop the next financial crisis.
 

“I was just documenting what Goldman was doing,” she said. “If I was not able to push through something that obvious, the Federal Reserve Bank of New York certainly won’t be capable of supervising banks when even more serious issues arise.”
 

ProPublica research director Liz Day contributed to this story.

 

Courtesy: ProPublica.org

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COMMENTS

R Balakrishnan

3 years ago

So obvious that Goldman writes the rules. Every firm is being chased by the Fed except Goldman- Clearly, Goldman is using its clout to ensure that others are wiped out slowly but surely to ensure their dominance. Masters of the Univers

Sensex, Nifty in a bullish mode: Thursday closing report

The first sign of weakness in Nifty will be a close below 5,960

The market today witnessed a volatile session with no proper direction. During today’s trading session the indices moved in a narrow range (Sensex 188 points, Nifty 54 points). This was the smallest range since 26 September 2013.

 

The indices opened marginally lower, Sensex at 20,229 while the Nifty at 6,001. The Sensex hit the intra day high and low in the morning session itself while the Nifty after hitting its low in the morning session recovered to hit the high in the early noon session. Sensex hit a high of 20,324 while the Nifty hit a high of 6,034.  The indices hit a low of 20,136 and 5,980. Sensex closed at 20,273 (up 24 points or 0.12%) while the Nifty closed at 6,021 (up 14 points or 0.22%). The National Stock Exchange (NSE) recorded a lower volume of 55.96 crore shares.

 

Except for Bank Nifty (down 0.45%); Finance (down 0.21%); FMCG  (down 0.03%) and Media (down 0.03%) all the other indices on the NSE ended in the green. The top five gainers were Auto (1.82%); Smallcap (0.86%); PSU Bank (0.86%); Nifty Junior (0.72%) and Metal (0.58%).

 

Of the 50 stocks on the Nifty, 29 ended in the green. The top five gainers were Tata Motors (5.55%); Ranbaxy (3.32%); NMDC (3.30%); Lupin (2.68%) and Grasim (2.07%). While the losers were Tata Power (2.74%); Hindalco (2.38%); Kotak Mahindra Bank (1.63%); Hindustan Unilever (1.48%) and Bajaj Auto (1.48%).

 

The International Monetary Fund (IMF) had yesterday projected the domestic economic growth at 3.8% in FY14 against 5.6% forecast in July. The IMF today clarified that "For India, we wish to clarify the basis on which our forecasts are produced. To be comparable across countries, the IMF world economic outlook projections are done at market prices, which differs somewhat from the factor cost definition used by the government and most analysts". However, today,  India's Economic Affairs Secretary Arvind Mayaram has said the country still has the potential for achieving a growth rate of more than 5% this fiscal year.

 

US indices closed mainly in the green on the back of signs of progress in ending deadlock in Washington after news that US President Barack Obama would meet House Democrats and House Republicans. House Republican and Senate Democratic leaders are open to a short-term increase in the $16.7 trillion debt ceiling, according to congressional aides who spoke on condition of anonymity.

 

Brazil's central bank on Wednesday raised the country's baseline lending rate once more by half a point. But the central bank also mentioned that it will slow the pace of rate hikes going forward.

 

Except for Shanghai Composite (down 0.94%), Hang Seng (down 0.36%), Seoul Composite (down 0.07%) all the other Asian indices ended in the green. Nikkei 225 was the top gainer, up 1.12%. Taiwan's markets were closed for a holiday.

 

Japanese core machinery orders rose 5.4% in August from the previous month, the government said Thursday, on a recovery in capital spending by businesses and increased demand ahead of a planned sales-tax hike. That came after a 0.03% decline in July, and was the first rise in three months.

 

European indices were trading in the green.  US Futures were trading a percentage higher.

 

In Europe, Bank of England's (BoE) monetary policy announcement is due later in the global day today, 10 October 2013. The BoE is expected to keep rates steady at 0.5% as the central bank has tied any changes in rates to a drop in the unemployment rate to 7%. Also, the bank is expected to retain the £375 billion quantitative easing program.

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