Prosecutor conceded lack of criminal evidence in Federal Reserve investigation, transcript shows

WASHINGTON — The Justice Department’s investigation into a $2.5 billion renovation project at the Federal Reserve found no evidence of a crime, a federal prosecutor privately acknowledged under questioning by a skeptical judge earlier this month, according to a transcript of the closed-door hearing.

This admission by Assistant U.S. Attorney Andrew Massucco came during a March 3 hearing that was held behind closed doors, according to the transcript. Eight days later, Chief Justice James Boasberg quashed the government’s subpoenas to the Federal Reserve, dealing a major blow to the government’s investigation.

In his March 11 ruling, Boasberg said the government had produced “virtually no evidence” to suspect Fed Chairman Jerome Powell of a crime. The judge, who was appointed to the bench by Democratic President Barack Obama, also called prosecutors’ justification for the subpoenas “thin and baseless.”

At the previous hearing, Boasberg asked prosecutors from U.S. Attorney Jeanine Pirro’s office to clarify any evidence of fraud or criminal misconduct related to Powell’s testimony about the renovation project or the construction work itself.

“So what false statements did (Powell) make to Congress? the judge asked Massucco, according to the transcript.

“Well, we don’t know, that’s my first answer,” replied Massucco, head of the criminal division in Pirro’s Washington office. “However, some areas he addressed have raised concerns.”

“Okay,” the judge continued. “And then, what is the evidence of fraud or criminal wrongdoing in relation to the renovations?

“Again, we don’t know right now. However, there are 1.2 billion reasons for us to look into it,” Massucco said, referring to the amount of cost overruns on the project.

The investigation delayed the Senate’s consideration of Kevin Warsh, President Donald Trump’s pick to replace Powell when his term ends on May 15. Powell may remain president beyond that date if no replacement has been approved.

“A mountain of evidence suggests that the government served these subpoenas on the Board to pressure its president to vote for lower interest rates or resign,” the judge wrote.

Massucco said during the closed-door hearing that there was no evidence that prosecutors’ motive for the grand jury subpoenas “was anything other than trying to get to the truth of the case.”

“And we have the right to do it,” he added.

Robert Hur, a lawyer who represented the Federal Reserve Board of Governors at the March 3 hearing, said the subpoenas were part of a pressure campaign to support Trump’s push for lower interest rates.

“He clearly has very strong political motivations to try to get interest rates lowered, but because of the guardrails that have been erected by Congress around the independence of the Federal Reserve when it comes to setting monetary policy, he is not succeeding,” Hur told the judge.

Pirro, a former Fox News host who was chosen by Trump to lead the nation’s largest U.S. attorney’s office, ridiculed Boasberg as an “activist judge” and claimed he had “neutralized the grand jury’s ability to investigate crimes.” She promised to appeal her decision.

“It’s a mistake and it has no legal authority,” she said at a news conference earlier this month.

A Fed spokesperson declined to comment Tuesday.

The investigation by Pirro’s office focused on brief testimony by Powell last June before the Senate Banking Committee, when he was questioned about cost overruns related to extensive renovations to the Fed’s buildings. The Fed’s most recent estimates suggest that the current estimated cost of $2.5 billion is about $600 million higher than the $1.9 billion estimate for 2022.

In his ruling, Boasberg said the Justice Department rejected his offer to let the government submit additional evidence against Powell directly to him, so he would not have to reach out to the Fed or Powell.

“The Court therefore has no credible reason to believe that the government is investigating suspicious facts rather than targeting a disadvantaged official,” the judge wrote.