US judge upholds block on subpoenas to Fed's Powell, teeing up likely appeal

By Andrew Goudsward and Nate Raymond

WASHINGTON, April 3 (Reuters) - A U.S. judge on Friday stood by his prior decision to block subpoenas issued in a criminal investigation into Federal Reserve Chair Jerome Powell, setting up a likely appeal that could further delay President Donald Trump's move to install a more compliant central bank head.

Chief U.S. District Judge James Boasberg in Washington, D.C. rejected the Justice Department's bid to reconsider his earlier ruling, which had effectively halted the criminal probe into Powell.

Boasberg in a March 13 ruling determined that subpoenas to the Fed's Board of Governors in January were issued for the improper purpose of pressuring Powell to accede to Trump's demands to rapidly lower interest rates or resign.

The subpoenas, issued by Washington, D.C.'s top federal prosecutor Jeanine Pirro, a stalwart Trump ally, sought information about cost overruns in renovations at the Fed's headquarters and Powell's testimony to Congress last year about the project.

Boasberg, in Friday's ruling, said Pirro's office had "not come close to convincing the Court that a different outcome is warranted," adding that prosecutors had a "total lack of a good-faith basis to suspect a crime."

"The Government's fundamental problem is that it has presented no evidence whatsoever of fraud," wrote Boasberg, who was appointed by Democratic President Barack Obama.

A spokesperson for Pirro in a statement said her office "will absolutely appeal the judiciary's interference with our access to the grand jury."

The Fed declined to comment.

The ruling is Powell's latest victory in his battle with Pirro's office about the investigation, which he has called a pretext for Trump to gain more influence over the Fed and monetary policy.

Any appeal by Pirro would be heard by the U.S. Court of Appeals for the D.C. Circuit. Justice Department leadership has backed the decision to appeal, according to a source familiar with the matter.

SUCCESSOR CONFIRMATION DELAY

The appeal could delay confirmation of Kevin Warsh, Trump's pick to succeed Powell as Fed chair.

U.S. Senator Thom Tillis of North Carolina, a Republican member of the Senate Banking Committee who has criticized the probe into Powell, has vowed to continue blocking Warsh's nomination while any appeal plays out.

Powell has pledged not to leave the central bank until the probe is over.

Prosecutors have said they are investigating Powell for potential fraud charges and false statements to a congressional committee. But a top lawyer in Pirro's office acknowledged in court on March 3 that prosecutors do not currently know what evidence exists that Powell committed a crime, according to a court transcript.

Pirro's office faced a high legal bar to convince Boasberg to reverse his earlier decision, having to show that either new evidence emerged or that the judge made a clear legal error.

Justice Department lawyers argued that Boasberg set too high a standard for prosecutors to meet at the early stages of an investigation and misinterpreted the timeline of the probe.

Lawyers for the Fed's Board of Governors argued that Boasberg's initial ruling was backed by "overwhelming evidence."