WASHINGTON — A disagreement over how to address allegations of misconduct against senior Federal Deposit Insurance Corp. staff came to a head after the FDIC board approved a resolution directing investigations of any FDIC senior leaders toward another federal agency.
By a 3-2 vote — with all Democratic board appointees voting in favor — the FDIC decided on Wednesday to outsource the investigations without specifying which agency would take the lead. The likely candidates are the General Services Administration or the National Credit Union Administration.
FDIC staff say such investigations could begin within a matter of weeks. On a call, FDIC staff said they already have memorandums of understanding with other agencies to conduct other kinds of investigations that could be revised or serve as models for new agreements. The resolution would apply to any board member or employee at the executive manager or corporate expert level.
The board's decision follows the findings from
To address this, the FDIC on Thursday sent an email to all employees and former employees who provided information to Cleary Gottlieb, asking them to consent to having their information used in future investigations.
If employees consent to the use of their information, it will be handed over to the third-party investigator retained under the FDIC board's resolution. The FDIC said this approach is designed to respect confidentiality agreements and ensure that only those who are comfortable with the process will have their information disclosed.
The process outlined in the resolution, the agency said, would remain in place until
FDIC staff said they are interviewing candidates for the director position, hoping to have someone in place within weeks. Once hired, the new director, in collaboration with the board, will determine how quickly third parties can be retained to conduct these investigations.
The resolution has not been without criticism. Board member Jonathan McKernan said
"My proposal would have just replicated the same committee structure that successfully and quickly oversaw Cleary Gottlieb's review," McKernan said. "[It would have] 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."
McKernan said his proposal — like the resolution that was ultimately enacted — would require a waiver to access any information protected by Cleary Gottlieb's confidentiality agreement.
However, some of the allegations in the Cleary Gottlieb report against senior staff — supported in part by non-confidential information like emails and Teams messages — would have been directly provided to the independent committee under McKernan's proposal.
McKernan said his proposal would have accelerated the investigation by allowing outside investigators quicker access to more information by making collected FDIC records and the Cleary Gottlieb information available to the outside investigators from the beginning. Under the approach that was ultimately adopted, 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.
Outside investigators, he said, could potentially fully investigate incidents using those Teams messages and other collected FDIC records while still protecting the anonymity of the victims and others at the meeting.
"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," McKernan said.
"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," he said.
When reached for comment, McKernan said he believes the agency's plan is insufficient and would delay investigations.
"We should be aiming for prompt, well-informed investigations of all of the executive misconduct identified in Cleary's report. The half-measure adopted [Wednesday] is unlikely to achieve that," McKernan said, expressing concerns about the effectiveness of involving other agencies.
Hsu, who is acting Comptroller of the Currency and also sits on the FDIC board, expressed support for the resolution and emphasized the importance of implementing the Cleary Gottlieb report's recommendations, maintaining confidentiality for those involved and making structural changes to address issues like retaliation. Hsu said he was surprised by McKernan's objection, calling his counterproposal a "distraction" from substantive goals of the board.
"Throughout this process, I have put the interests of FDIC employees first and repeatedly emphasized the need to focus on substance — namely, the steps necessary to transform the culture and structure of the agency," he said. "The proposal adopted by the Board ... provides a clear path for executives and Board members to be held accountable in a timely and fair manner pending the full operationalization of the OPC and [Office of Equal Employment Opportunity], while also respecting the confidentiality and anonymity of those who engaged in the Cleary Gottlieb review."
