DOJ Finds No Evidence of Crime in Federal Reserve Renovation, Prosecutor Admits

A sealed court transcript revealed that the Justice Department's criminal investigation of the Federal Reserve's $2.5 billion renovation project produced no evidence of wrongdoing — an admission made privately by Assistant U.S. Attorney Andrew Massucco during a March 3 hearing closed to the public.

During the hearing, Chief Judge James Boasberg pressed Massucco directly: "So what false statements did (Powell) make before Congress?" Massucco, the chief of the criminal division for U.S. Attorney Jeanine Pirro's Washington office, replied: "Well, we don't know is my first answer." When Boasberg followed up — "And then what evidence is there of fraud or criminal misconduct in relation to the renovations?" — Massucco said: "Again, we do not know at this time. However, there are 1.2 billion reasons for us to look into it," referring to the amount of the project's cost overruns.

Eight days after that exchange, Chief Judge Boasberg quashed government subpoenas issued to the Federal Reserve, dealing a severe blow to the government's investigation. In his March 11 ruling, Boasberg said the government had produced "essentially zero evidence" to suspect Fed Chair Jerome Powell of a crime. The judge, who was nominated to the bench by Democratic President Barack Obama, also described prosecutors' justification for the subpoenas as "thin and unsubstantiated."

In the ruling, Boasberg wrote that the court was "left with no credible reason to think that the Government is investigating suspicious facts as opposed to targeting a disfavored official." He added that "a mountain of evidence suggests that the Government served these subpoenas on the Board to pressure its Chair into voting for lower interest rates or resigning."

The investigation by Pirro's office centered on brief testimony last June by Powell before the Senate Banking Committee, when he was asked about cost overruns on the Fed's extensive building renovations. The most recent estimates from the Fed suggest the current cost of $2.5 billion is about $600 million higher than a 2022 estimate of $1.9 billion. In his ruling, Boasberg said the Justice Department rejected his offer to let the government submit further evidence against Powell directly to him, so that they wouldn't have to tip their hand to the Fed or Powell.

Robert Hur, an attorney who represented the Federal Reserve board of governors at the March 3 hearing, told the judge the subpoenas were part of a pressure campaign to support Trump's push for lower interest rates. "He clearly has very strong political motives to try to get lower interest rates, but because of the safeguards that have been erected by Congress around the Federal Reserve's independence when it comes to setting monetary policy, he can't get it," Hur said.

The DOJ probe had heightened fears that the administration wanted to erode the Fed's independence, which could leave the door open for political interference in setting interest rates for the world's largest economy.

Pirro, a former Fox News host who was Trump's pick to lead the nation's largest U.S. Attorney's office, derided Boasberg as an "activist judge" and claimed he had "neutered the grand jury's ability to investigate crime." She vowed to appeal his decision. "This is wrong and it is without legal authority," she said at a news conference.

The investigation has delayed Senate consideration of Kevin Warsh, President Donald Trump's pick to replace Powell when his term ends May 15. Powell can remain as chair past that date if no replacement has been approved. With Pirro's appeal pending and Powell's term expiring in weeks, the case has become a direct test of whether the Justice Department can use the machinery of criminal process to reshape the leadership of an independent central bank.