Criminal Enforcement of the Troubled Asset Relief Program (TARP)-and the Term Asset-Backed Loan Securities Facility (TALF) program-Part II
We have mentioned the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), one of the entities charged with oversight on how the eventual $700 billion in TARP funds disbursed to various banks and institutions are used. Special Inspector General (SIG) Neil Barofsky, the “TARP Cop,” issued a Quarterly Report to Congress back on April 21, 2009, which set out in detail the structure for criminal oversight of TARP, which we have reviewed and outlined herein.
SIG Barofsky has announced that there are currently 20 criminal investigations and 6 audits relating to whether TARP funds have been mismanaged. The audits relate to (1) use of funds by TARP recipients, (2) how TARP recipients are implementing controls on executive compensation, (3) TARP assistance to Bank of America, (4) possible external influences on Treasury or bank regulators in determining applications from banks seeking TARP funds, and (5) the large bonus payouts to American International Group, Inc. (AIG) employees and any counterparty payments to other financial institutions by AIG of the TARP monies which it has received.
SIGTARP was created by Section 121 of the Emergency Economic Stabilization Act of 2008 (EESA), which gives SIGTARP the authorities listed in Section 6 of the Inspector General Act of 1978, including the power to obtain documents and other information from Federal agencies and to subpoena reports, documents, and other information from persons or entities outside of Government. On March 25, 2009, Congress enacted the Special Inspector General for the Troubled Asset Relief Program Act of 2009, which gives SIGTARP the authority to conduct audits and investigations and allows SIGTARP the authority to undertake law enforcement functions without prior approval from the Attorney General. SIGTARP will receive $50 million in Federal funds to carry out its oversight and enforcement activities.
SIGTARP’s stated mission:
[I]s to advance economic stability through transparency, coordinated oversight, and robust enforcement, thereby being a voice for, and protecting the interests of, those who fund TARP — i.e., the American taxpayers… [through] promoting transparency in TARP, through effective oversight of TARP in coordination with other relevant oversight bodies, and by robust criminal and civil enforcement against those, whether inside or outside of Government, who waste, steal, or abuse TARP funds.
SIGTARP cooperates in its functions with the other TARP oversight bodies, the Financial Stability Oversight Board (FSOB), the Congressional Oversight Panel (COP), and the Government Accountability Office (GAO), as well as numerous other Federal entities.
In regard to criminal investigations, SIGTARP’s Investigations Division is led by Christopher R. Sharpley, Deputy Special Inspector General for Investigations. The Investigations Division employs special agents, investigators, analysts, and attorney advisors. The Quarterly Report states that:
The Investigations Division will, of course, pursue any wrongdoers within Government, but it will also focus on the recipients of TARP funds — i.e., the institutions that receive TARP investments and the vendors hired to administer TARP activities. Those who make intentional misrepresentations in the TARP application process or in their fi nancial reporting to Treasury may be in violation of several criminal statutes, including securities fraud, wire fraud, mail fraud, and false statements. SIGTARP intends to investigate these potential crimes vigorously.
SIGTARP partners with the FBI, the IRS, the Securities and Exchange Commission, the Department of Justice and States’ Attorneys General. Investigations and sharing of information between these law enforcement entities are coordinated by the Assistant Inspector General for Investigations (AIGI) TARP Working Group. SIGTARP further gains information from the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).
SIGTARP has also established a hotline for the public to report “allegations of fraud, waste, abuse, and reprisals for bringing to light TARP-related concerns.” The Quarterly Report claims that SIGTARP has received and analyzed over 200 tips.
The Term Asset-Backed Loan Securities Faciliy (TALF) program is an asset-backed securities loan program guaranteed by the Small Business Administration initiated by the U.S. Federal Reserve in November 2008. The TALF program will eventually involve up to $1 trillion in loans. The Term Asset-Backed Loan Securities Faciliy (TALF) Task Force consists of the Office of the Inspector General of the Board of Governors of the Federal Reserve Board, the Federal Bureau of Investigation, Treasury’s Financial Crimes Enforcement Network, U.S. Immigration and Customs Enforcement, the Internal Revenue Service Criminal Investigation division, the Securities and Exchange Commission, and the U.S. Postal Inspection Service. SIGTARP organized the TALF Task Force “to deter, detect, and investigate any instances of fraud or abuse in TALF.” The TALF Task Force Consists of the Federal Reserve Board Inspector General, the FBI, FinCEN, U.S. Immigration and Customs Enforcement, IRS-CI, SEC, and the U.S. Postal Inspection Service. The Quarterly Report states that:
The members of the TALF Task Force will combine their shared expertise in securities fraud investigations and maximize their resources to deter potential criminals, to identify and stop fraud schemes before they can fully develop, and to bring to justice those who seek to commit fraud through TALF. Although TALF participants who play by the rules have nothing to fear from this Task Force, Federal law enforcement is ready now to detect, investigate, and bring to justice any who would try to steal from this important program.
