DOJ will not reopen Powell criminal investigation over Fed renovation

The DOJ Powell criminal investigation into the Federal Reserve’s headquarters renovation will not be reopened, Attorney General Todd Blanche said on Oct. 2. The decision concerns the prior inquiry into former Fed Chair Jerome Powell over construction cost overruns, rather than the central bank’s interest-rate policy.

Blanche told Bloomberg News that the Justice Department was not reopening a criminal investigation into Powell. Reuters and CNBC also reported the statement. The attorney general left open the possibility that the department could examine the project further or act if later reviews produce evidence of wrongdoing.

The distinction is material: the announced decision applies to the previous investigation into Powell, which the Justice Department closed in April. It does not foreclose a future inquiry into the renovation should new evidence emerge.

Why did DOJ close the Powell renovation investigation?

The inquiry became public in January, when prosecutors sought records connected to the Federal Reserve’s renovation. Politico reported that U.S. Attorney Jeanine Pirro ended the investigation in April while the Fed’s inspector general continued its review.

CNBC reported that a federal judge quashed grand-jury subpoenas in March, finding that they had been issued for an improper purpose and that the government had produced essentially no evidence that Powell had committed a crime. CNBC said the Justice Department disputed that decision but closed the investigation rather than appeal.

The Fed inspector general subsequently found no reasonable grounds to believe that a criminal-law violation had occurred requiring a referral to the attorney general, according to CNBC and Politico. The watchdog also found no misconduct by the Fed Board, Politico reported.

Its report nevertheless criticized the central bank’s management of the project. Politico reported that the watchdog said the Fed had not followed cost-control practices, including setting a guaranteed maximum price. The renovation budget rose from about $1.3 billion in 2020 to nearly $2.4 billion, according to Politico. The report cited Covid-era construction-cost inflation and asbestos found during the work among factors contributing to the overrun.

What scrutiny of the Fed project remains?

Blanche said inadequate oversight of a large construction project is not necessarily criminal conduct, Axios reported. But he did not rule out Justice Department action if an independent review uncovers evidence of criminal wrongdoing.

Fed Chair Kevin Warsh has said the project will face additional scrutiny. CNBC and the Guardian reported that he planned an independent audit, while Politico reported that he said the General Services Administration would take over project management. The accounts describe oversight measures, but differ on the specific arrangements.

Powell left the chairmanship in May when Warsh succeeded him, but remains a Fed governor. His term on the Board of Governors runs through Jan. 31, 2028, CNBC reported. President Donald Trump has continued to call for Powell to resign from the board, a political demand separate from the Justice Department’s decision on the prior criminal investigation.

This story draws on original reporting from CNBC.