Adriana Kugler testifies during a Senate Banking Committee hearing on her nomination to the Federal Reserve Board of Governors on June 21, 2023, at the Capitol in Washington, USA.
Jonathan Ernst | Reuters
Former Federal Reserve chief Adriana Kugler violated central bank rules last year that prohibit her from trading individual stocks or conducting financial transactions near interest rate meetings, leading to her abrupt resignation, according to a report released Saturday by the U.S. Office of Government Ethics.
The report was released three months after Mr. Kugler mysteriously left the Fed board without giving a reason. Kugler joined the Fed in September 2023 after being appointed by then-President Joe Biden.
Kugler’s resignation comes after he applied for a waiver from Chairman Jerome Powell based on a disclosure form showing he had impermissible holdings, but was denied, a Fed official familiar with the matter told CNBC.com.
One official said concerns about trade activities by Ms. Coogler or her husband date back to at least September 2024, when she began working with ethics authorities to resolve trade policy violations.
A financial disclosure report filed by Kugler with OGE on September 11 of this year includes details of securities transactions made by her or her husband, but it notes that Ethics Office officials have refused to certify the report.
In a memo on Friday’s disclosure, ethics officials said that “matters related to this disclosure were referred by the bureau to the Federal Reserve Board’s independent Office of Inspector General earlier this year.” The Inspector General is the internal ethics oversight body for federal departments and agencies.
Another note in the report reads: “Consistent with her disclosure on September 15, 2024, certain trading activities were carried out by Dr. Kugler’s spouse without Dr. Kugler’s knowledge and she asserts that her spouse did not intend to violate any rules or policies.”
Trouble with transactions
Kugler is married to immigration attorney Ignacio Donoso.
Her disclosures demonstrate two types of violations of Fed rules regarding financial transactions by central bank officials. One is to purchase stocks of individual companies rather than investment trusts. Purchases of securities prior to and during the so-called “blackout period” following Federal Open Market Committee meetings.
Key interest rates are set at the FOMC meeting. Speculation regarding these meetings and their actual outcome can have a significant impact on the prices of stocks and bonds.
Mr. Kugler’s violations related to stock purchases in the following companies: apple, southwest airlines, caterpillar and kava groupthe report shows.
Mr. Kugler participated in FOMC meetings while at the Fed. However, she missed the FOMC meeting in July, citing what the Fed publicly said was a personal matter.
Just before the July meeting, Mr. Kugler requested a waiver of the ethics disclosure filing deadline to address unacceptable holdings in his investment portfolio, according to Fed officials who spoke to CNBC.
Officials said she applied for and received a standard extension to file annual ethics disclosures two months ago.
Given Mr. Kugler’s repeated efforts to address the issue, Chairman Powell rejected further waiver requests and, as a result, refrained from participating in the July FOMC meeting.
Shortly after, on August 1st, Mr. Coogler announced his intention to resign on August 8th.
In a separate disclosure document filed in October 2024, Coogler similarly accused her husband, Donoso, of four stock purchases that violated Fed trading rules: three Apple shares in July 2024 and one Hippo stock in September 2024.
“These four purchases were made by my spouse without my knowledge. I categorically state that my spouse did not intend to violate any rules,” Coogler said at the time.
“After learning of the purchases, I immediately notified the ethics authorities and, upon their direction, began selling these assets as soon as possible in accordance with FOMC’s ethics policy.”
CNBC asked Coogler for comment on the new ethics disclosure report, which also revealed that he received more than $41,000 worth of “pro bono legal services” from the law firm Arnold & Porter.
Pro bono means free.
CNBC also reached out to Donoso for comment.
rule change
After leaving the Fed, Mr. Kugler returned to Georgetown University in Washington, D.C., where he is a professor at the McCourt School of Public Policy and Economics.
The Federal Reserve adopted new rules in early 2022 that prohibit its officials from trading individual stocks, bonds and cryptocurrencies.
The move comes after revelations that then-Regional Fed Presidents Eric Rosengren (Boston) and Robert Kaplan (Dallas) traded stocks and equity funds just before the central bank adopted sweeping measures to support the U.S. economy during the first weeks of the coronavirus pandemic.
Mr. Rosengren and Mr. Kaplan were cleared of any legal wrongdoing, but both resigned amid questions that Fed officials may have used privileged information for financial gain. Other transactions by Fed officials, including Mr. Powell, have also come under scrutiny and drawn intense criticism from the public and on Capitol Hill.
Kugler’s sudden resignation allowed President Donald Trump to appoint Stephen Milan to replace her on the Fed board for the remainder of her term.
Millan, whose current term ends on January 31, has taken an unpaid leave of absence as chairman of the White House Council of Economic Advisers.
In 2024, the Fed’s inspector general found that Atlanta Fed President Rafael Bostic, who will retire in February, violated trading rules.
