Former Fed Official Resigned Following Ethics Probe, Document Shows

Former Federal Reserve board member Adriana Kugler stepped down from the central bank in August amid scrutiny of her financial holdings, which appeared to violate the central bank’s ethics rules, according to a newly-released document detailing her trading activity.

Her departure came after Fed Chair Jerome Powell refused to grant her a waiver to exit out-of-compliance investments just ahead of the Fed’s July 29-30 interest rate-setting meeting, according to a Fed official who was granted anonymity to discuss her exit. She did not attend the meeting, citing “personal” reasons, and resigned Aug. 1.

According to a document released by the Office of Government Ethics on Saturday, Kugler or her husband bought and sold multiple individual stocks in 2024, a category of asset that senior Fed officials are not allowed to purchase. Some of the trades had been previously disclosed, but the document showed several more.

Kugler did not immediately respond to a request for comment.

For example, the document listed a purchase of stock in Southwest Airlines on March 22, 2024, of between $1,001 and $15,000, and then another similar purchase on April 17, 2024. Then there was a sale of between $15,001 and $50,000 in Southwest stock on April 29, 2024, the day before the Fed gathered for a two-day interest-rate setting meeting.

Kugler or her husband also bought stock in Cava Group on March 13, 2024, less than a week before the Fed had a rate-setting meeting on March 19-20.

Other financial transactions listed involve stock in Apple and Caterpillar.

Kugler’s apparent violations of Fed rules came after a string of trading moves by Fed officials in 2020 during the coronavirus pandemic drew intense scrutiny, which ultimately led to the resignation of three top officials in 2021 and early 2022, including former Vice Chair Richard Clarida. As a result of that scandal, the Fed tightened its conflict of interest rules to bar top officials from owning most assets.

Under long-standing Fed ethics rules, officials are not allowed to trade during a blackout period before interest rate decisions. And according to rules that took effect in 2022, Fed policymakers are forced to hold their investments for at least a year.

“Consistent with her September 15, 2024, disclosure, certain trading activity was carried out by Dr. Kugler’s spouse, without Dr. Kugler’s knowledge and she affirms that her spouse did not intend to violate any rules or policies,” according to an endnote in the disclosure.

Kugler’s financial disclosure form was not certified as being in compliance with ethics rules.

Fed board ethics officer Sean Croston noted in the document that “matters related to this disclosure” were referred by the Fed board’s ethics office to the central bank’s inspector-general. The Fed official said that referral occurred in January.

Kugler, an appointee of former President Joe Biden and the first Hispanic official to have a vote on interest rates in Fed history, joined the central bank in 2023. Her term was scheduled to expire at the end of January, but her early departure created an opening for President Donald Trump to appoint his chief economist, Stephen Miran, to the open seat.

All of the other seven seats on the Fed board are currently occupied and the next opening is not guaranteed until 2028, when Powell’s board term expires. The Fed chief may choose to leave the central bank when his term as its chair ends in May, but he has not committed to do so.