The Justice Department’s investigation of a $2.5 billion renovation project at the Federal Reserve didn’t find any evidence of a crime, a federal prosecutor privately conceded under questioning by a skeptical judge earlier this month, according to a transcript of the sealed hearing.
That admission by Assistant U.S. Attorney Andrew Massucco came during a March 3 hearing that was closed to the public, the transcript shows. Eight days later, Chief Judge James 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.”
During the earlier hearing, Boasberg asked the prosecutor from U.S. Attorney Jeanine Pirro’s office to specify 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 before Congress?” the judge asked Massucco, according to the transcript.
“Well, we don’t know is my first answer,” replied Massucco, chief of the criminal division for Pirro’s Washington office. “However, there are certain areas that he addressed that caused concern.”
“Okay,” the judge continued. “And then what evidence is there of fraud or criminal misconduct in relation to the renovations?”
“Again, we do not know at this time. However, there are 1.2 billion reasons for us to look into it,” Massucco said, referring to the amount of the project’s cost overruns.
The Washington Post was the first to report on the details of the hearing from the transcript.
The investigation has delayed Senate consideration of Kevin Warsh, President 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.
“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 judge wrote.
Massucco said during the sealed hearing that there is no evidence that prosecutors’ motive for the grand jury subpoenas “is anything other than trying to find the truth of the matter.”
“And we have a right to do that,” he added.
Robert Hur, an attorney who represented the Federal Reserve board of governors at the March 3 hearing, said the subpoenas are part of a pressure campaign to support Mr. 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 told the judge.
Pirro, a former Fox News host who was Mr. 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 earlier this month.
A Fed spokesperson declined to comment Tuesday.
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 estimated 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.
“The Court is thus left with no credible reason to think that the Government is investigating suspicious facts as opposed to targeting a disfavored official,” the judge wrote.
