Adriana Kugler testifies before a Senate Banking Committee hearing on her nomination to serve on the Board of Governors of the Federal Reserve on Capitol Hill in Washington, USA, June 21, 2023.
Jonathan Ernst | Reuters
Former Federal Reserve Governor Adriana Kugler last year violated central bank rules that ban trading in individual stocks and conducting financial transactions near interest rate meetings. Those actions led to her sudden resignation, according to a report released Saturday by the U.S. Office of Government Ethics.
The report comes three months after Kugler mysteriously resigned from the Fed’s Board of Governors without explanation. Kugler joined the Fed in September 2023 after being appointed by then-President Joe Biden.
Kugler’s resignation came after she sought a waiver from Chairman Jerome Powell on a disclosure form showing she had improper holdings and he rejected it, Fed officials familiar with the matter told CNBC.com.
An official said concerns related to the trading activities of Kugler or her husband extended to at least September 2024, when she began working with ethics officials to resolve trading policy violations.
A financial disclosure report Kugler filed with the OGE on Sept. 11 this year, which details securities transactions by her or her husband, said an ethics office official declined to certify the report.
In a note on Friday’s disclosure, an ethics official said: “Matters related to this disclosure were referred by the office to the independent Office of Inspector General of the Board of Governors of the Federal Reserve System earlier this year.” An inspector general is an internal ethics watchdog for federal departments and agencies.
A further note on the report states: “In accordance with her disclosure dated September 15, 2024, certain trading activities of Dr.
Problems with trades
Kugler is married to Ignacio Donoso, an immigration lawyer.
Their disclosure shows two types of violations of Fed rules regarding financial transactions by senior central bank officials: purchases of individual company stocks as opposed to mutual funds; and purchases of securities during so-called “blackout periods” before and after Federal Open Market Committee meetings.
The FOMC meetings set interest rates. Speculation about these meetings and their actual outcome can significantly affect stock and bond prices.
Kugler’s violations were related to stock purchases of companies including Apple, Southwest Airlines, caterpillar And Cava groupsays the report.
Kugler attended FOMC meetings during her tenure at the Fed. But she missed the FOMC meeting last July because the Fed had publicly said it was a personal matter.
According to Fed officials who spoke to CNBC, Kugler requested a waiver of the filing deadline for ethics disclosures shortly before the July meeting to address the issue of prohibited holdings in her investment portfolio.
Two months earlier, she had requested and received a standard extension for filing annual ethics disclosures, officials said.
In the face of repeated efforts to resolve Kugler’s problems, Powell rejected her request for another waiver, which resulted in her not attending the July FOMC meeting.
Shortly thereafter, on August 1, Kugler announced her intention to resign on August 8
In another disclosure filed in October 2024, Kugler also pointed the finger at her husband, Donoso, for four stock purchases — three of Apple shares in July of that year and one of Cava shares in September — that violated Fed trading rules.
“These four purchases were made by my spouse without my knowledge, and I certify that my spouse had no intention of violating any rules,” Kugler said at the time.
“Upon learning of the purchases, I immediately notified the ethics officers and, at their direction, initiated the disposition of these assets as quickly as possible in accordance with the FOMC’s ethics guidelines.”
CNBC has reached out to Kugler for comment on the new ethics disclosure report, which also reveals that Kugler received “pro bono legal services” worth more than $41,000 from the law firm Arnold & Porter.
Pro Bono means free.
CNBC has also reached out to Donoso for comment.
Rule changes
After leaving the Fed, Kugler returned to Georgetown University in Washington, DC, where she is a professor at the McCourt School of Public Policy and Economics.
In early 2022, the Fed adopted new rules that banned officials from trading individual stocks and bonds as well as cryptocurrencies.
That move came after revelations that then-regional Fed presidents Eric Rosengren of Boston and Robert Kaplan of Dallas traded stocks and equity funds just before the central bank took sweeping measures to support the U.S. economy in the early weeks of the Covid-19 pandemic.
Rosengren and Kaplan were cleared of any legal wrongdoing, but both left their positions amid questions about the propriety of Fed officials potentially using confidential information for financial gain. Other dealings by Fed officials, including Powell, have also come under scrutiny and drawn strong criticism from the public and on Capitol Hill.
Kugler’s surprise resignation allowed President Donald Trump to name Stephen Miran as her successor to serve the remainder of her term on the Fed Board of Governors.
Miran, whose current term ends Jan. 31, took unpaid leave as chairman of the White House Council of Economic Advisers.
In 2024, the Fed’s inspector general found that Atlanta Fed President Raphael Bostic, who is retiring in February, had violated trading rules.
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