First TARP Criminal Case Reaches Speedy Conclusion
Last month, we described how the Office of the Special Inspector General for the Troubled Asset Relief Program (TARP), SIGTARP, had 20 criminal investigations in progress and had announced the first charges to be brought relating to TARP. The first case involved Gordon Grigg, who was charged in the Middle District of Tennessee for defrauding investors of more than $10 million in a Ponzi scheme in which Grigg falsely represented to investors that their funds were being used to purchase TARP guaranteed debt.
The criminal information against Grigg, which is available here, charges Grigg with 8 counts of mail fraud and wire fraud in violation Title 18 United States Code Sections 1341 and 1343. The information alleges that Grigg, an investment advisor in Franklin Tennessee, owned a group of corporations under the name of ProTrust. The information charges Grigg with soliciting investments for ProTrust beginning in 1996 and continuing through 2009 by falsley promising to invest and manage the money in "safe" investments, including alleged fixed-term certificates of deposit, private placements, corporate notes and debentures. Grigg falsely promised a high rate of return on the investments. Instead, Grigg used investors' funds for his personal benefit, to operate ProTrust and to disburse fictitious earnings and returns of deposit. Grigg also created false investment documents and account statements, and made false statements to investors to deceive them into believing that the investments were profitable. Grigg further falsely represented that ProTrust had partnerships or special relationships with large investment firms such as Berkshire Hathaway, Inc., Goldman Sachs & Co. and Morgan Stanley & Co.
The information states that Grigg and ProTrust never met any of the qualifying criteria to receive TARP funds, a never applied for, received approval from the Department of Treasury for, and never received any TARP funds. The TARP allegations in the Indictment allege that, between November 4, 2008, and January 28, 2009, Grigg, via mail and e-mail, solicited funds from new investors and existing ProTrust clients for investment in "government-guaranteed commercial paper and bank debt" under the TARP program and falsely represented that ProTrust had already committed more than $5 million in pooled client funds towards purchase of TARP guaranteed debt as part of a partnership between Berkshire Hathaway and Kohlberg Kravis Roberts & Co. Grigg stated that the investment was a 12.5 % government-guaranteed fund. Grigg further sent investors counterfeit investment contracts and release forms with false Committee on Uniform Securities Identification Procedures numbers.
The information against Grigg was issued on April 22 and Grigg entered a guilty plea to all counts on April 29. Grigg will be sentenced on August 6. Only a small portion of the conduct in the Grigg case actually concerns TARP. We will be monitoring for other criminal investigations and proceedings.
Tarp Tales, a site run by Citizens for Ethics and Responsibility in Government, has published a Bailout Halftime Report, in which it notes that, according to the Congressional Budget Office, 32 institutions have already repaid the government some $70 billion loaned under the Emergency Economic Stablization Act of 2008, with $369 billion still outstanding. The site notes that the highest subsidy rate and losses so far have been from the government's $79.7 billion investment in General Motors and Chrysler. The subsidy rate in the first $50 billion loaned to the automakers was $40 billion in lost value--or roughly 70 percent.
