As funding provided by the Troubled Asset Relief Program (“TARP”) works its way through sectors of the economy, it is important for banks and their customers to have an awareness of the federal government’s program for investigation and criminal prosecution of misuse of TARP funds. This potential exposure to criminal penalties is in addition to the potential exposure to treble damage claims for filing false reports discussed in an earlier article. It is important, therefore, for banks and their customers to take care that their transactions involving TARP funds are fully defensible and to maintain accurate records of the use of such funds.
Expansive Investigative Authority. A troublesome aspect of this potential exposure to criminal penalties is that the scope of investigative authority is not clear. Such exposure could apply to any impropriety in applying for or disbursing TARP funds and to any failure to properly implement the conditions applicable to recipients of TARP funds. The Emergency Economic Stabilization Act of 2008 established a Special Inspector General for the Trouble Asset Relief Program (“SIGTARP”). Neil M Barofsky, a former federal prosecutor, currently holds this office. The SIGTARP has largely undefined investigative authority, subpoena power and authority to refer misuse of TARP funds for criminal prosecution. The lack of clear legislative limitations on the investigative authority of the SIGTARP permits an expansive interpretation of the SIGTARP’s investigative role.
Communicating with the SIGTARP. The SIGTARP has requested information and documents from recipients of TARP funds and is expected to continue to do so as more parties receive TARP funding. It is important to realize that responses to such requests for information and documents must be made with care and attention to detail. Such responses and other communications with the SIGTARP are subject to the provisions of 18 U.S.C. § 1001 which creates criminal liability for knowingly and willfully making materially false statements to government officials. The review of SIGTARP requests and the preparation of communications with the SIGTARP should be given high priority. Consideration should be given to seeking the assistance of legal counsel in the preparation of such communications.
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