A top deputy to U.S. Attorney Jeanine Pirro acknowledged in a closed-door hearing this month that the Justice Department did not have evidence of wrongdoing in its criminal investigation of the Federal Reserve over the cost of its building renovations, according to a transcript of the court proceedings.
The prosecutor’s admission, which has not been previously reported, undercuts President Donald Trump’s claim that “there is criminality” in the $2.5 billion overhaul of the Fed’s headquarters overlooking the National Mall.
Attorneys for the Fed and the U.S. attorney’s office in D.C. battled over the legality of two grand jury subpoenas at the center of the investigation during a sealed hearing March 3. A transcript of the proceedings was later unsealed. Both subpoenas were quashed this month by a federal judge, who described them as an illegal effort by the Trump administration to pressure Fed Chair Jerome H. Powell to lower interest rates or resign from the independent central bank.
Pirro, the top federal prosecutor in D.C. and a Trump ally, opened the inquiry after Powell gave brief testimony on the renovation’s costs during a congressional hearing last year. The criminal investigation followed years of criticism from Trump over the Fed’s handling of monetary policy and his public demands that the Justice Department target his perceived political foes. Prosecutors are weighing whether the cost overruns amount to fraud and whether Powell gave false testimony to the Senate Banking Committee.
But G.A. Massucco-LaTaif, who was recently named chief of the criminal division of the U.S. attorney’s office in D.C., said at the March 3 hearing that Justice Department lawyers “do not know at this time” what evidence there is of fraud or criminal misconduct, arguing only that the project was $1.2 billion over budget and that “it doesn’t seem right.”
“There are 1.2 billion reasons for us to look into it,” Massucco-LaTaif told Chief U.S. District Judge James E. Boasberg.
Pressed by Boasberg, Massucco-LaTaif also said “we don’t know” what statements from Powell’s congressional testimony were false, adding that “there are certain areas that he addressed that caused concern,” according to the transcript.
A spokesperson for the U.S. attorney’s office said Tuesday that the purpose of a grand jury investigation is to determine whether there is probable cause that a crime was committed. “That is exactly what we are doing here as we investigate the discrepancies in Federal Reserve Chair Jerome H. Powell’s testimony before Congress and the billion-dollar-plus cost overrun,” the spokesperson said.
The Fed declined to comment.
The U.S. attorney’s office had alleged in written filings that Powell’s testimony contained “possible discrepancies” and that the cost overruns had raised “the specter of fraud,” but it did not offer detailed allegations. Pirro’s office has said prosecutors reviewed about 600 documents that the Fed submitted to Congress about the renovation before issuing the subpoenas, as well as an audit more than four years ago by the Fed’s inspector general that did not raise concerns about criminal conduct. Another audit of the construction costs by the inspector general is underway at Powell’s request.
Trump told reporters last week during an Oval Office appearance with the Japanese prime minister that the Fed’s renovation could have been completed on a $25 million budget. “They’re spending $4 billion. All right? So it’s, uh — there is criminality,” Trump said. “Maybe it’s with the contractor.” (The renovation’s cost is estimated at $2.5 billion, as prosecutors have said in court.)
Boasberg said in his ruling to quash the subpoenas that the U.S. attorney’s office had provided “essentially zero evidence” of a crime and had declined an offer to show him evidence in private, without attorneys for the Fed being present. “Indeed, most members of the Committee that Powell testified before — including a majority of each party’s members, as well as the Committee’s Chair — have said that they do not think he committed any crime,” the judge wrote.
Pirro has said the Justice Department plans to appeal Boasberg’s decision on the subpoenas. The U.S. attorney’s office also submitted a filing asking Boasberg to reconsider his ruling. Judges rarely grant such requests.
The Supreme Court has said grand juries have broad investigative powers and may act on tips, rumors, evidence offered by prosecutors or grand jurors’ personal knowledge. Subpoenas generally are presumed to be lawful if they seek information that could pertain to an ongoing grand jury investigation. But federal appellate courts across the country have ruled that subpoenas may be quashed if a target can show their sole or dominant purpose is to harass or intimidate.
Attorneys for the Fed’s board of governors said in a legal filing that cost overruns are not unusual for the federal government’s largest construction projects. The Department of Homeland Security’s new St. Elizabeth campus, which was once described as the largest federal construction project in the D.C. region, was $1.5 billion over budget in 2014 and still has not been completed, the attorneys noted. The Capitol Visitor Center and the Ronald Reagan Building and International Trade Center both ended up costing twice their original budgets, the lawyers added.
“While the Board is working diligently to manage the significant costs that come with renovating historic buildings, the Federal Reserve has explained that over the seven years of this project there have been increases in building costs, increases in labor costs, problems with asbestos contamination, and other elements that have contributed to these overruns,” the Fed attorneys said in a legal filing. “Nothing about cost overruns for such a project is unusual or indicative of criminal activity.”
The Federal Reserve has retained Robert K. Hur, the former special counsel who investigated but declined to seek charges against President Joe Biden over his handling of classified documents, to defend the central bank against the subpoenas. Powell has hired Gerson Zweifach, a former general counsel of News Corp. and 21st Century Fox, as his outside counsel. Pirro, who previously was a Fox News host, has assigned at least three prosecutors to the case.
The Trump administration has signaled it has no intention of backing off, even as some of the president’s allies have questioned whether he should find an off-ramp in his confrontation with Powell to clear the way for a swift confirmation of Kevin Warsh, the president’s nominee to become the next Fed chair.
The confirmation process has stalled because Sen. Thom Tillis (R-North Carolina), who holds a pivotal vote on the Senate Banking Committee, has pledged to block Warsh’s nomination until the Powell matter is closed. Powell, in turn, has pledged to keep serving as Fed chair on an acting basis until a new chair is confirmed.
Stephen Moore, a longtime Trump adviser and economist, described the standoff as self-defeating for the administration.
“A rivalry has emerged that is really counterproductive at this point,” Moore said in an interview. “The most important thing for Trump is to put aside disputes with Powell and get the new Fed chairman Kevin Warsh confirmed as quickly and expeditiously as possible. This feud between the two is conflicting with that goal.”
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