5 Ways A Special IG Can Combat Crisis Relief Fraud

By Christy Goldsmith Romero
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Law360 (June 2, 2020, 6:28 PM EDT) --
Christy Goldsmith Romero
Christy Goldsmith Romero
As the special inspector general over the $442 billion Troubled Asset Relief Program that still exists today, I lead a law enforcement office known as SIGTARP charged with investigating and auditing fraud, waste and abuse related to TARP programs.

The provisions of the TARP law that created SIGTARP, the Emergency Economic Stabilization Act, served as the model in the Coronavirus Aid, Relief, and Economic Security Act to create the new special inspector general for pandemic recovery. Like SIGTARP, SIGPR is charged with investigations and audits of national emergency rescue programs, and has similar authority and requirements.

Restoring confidence and lessening the impact of a national emergency was the goal of both TARP and the CARES Act, goals that would be harmed by fraud, waste and abuse. Fraud, waste and abuse is at its essence taking advantage of something that is not yours for the taking. It is particularly egregious when someone takes advantage of emergency rescue programs.

On Tuesday, the U.S. Senate confirmed the nomination of Brian D. Miller to be the special inspector general for pandemic recovery.

Having a dedicated special IG to combat rescue fraud, waste and abuse has significant advantages. Here are five insights on how a special IG protects the federal government, taxpayers and intended beneficiaries of federal rescue programs.  

1. A special IG brings justice and accountability by conducting criminal investigations staffed by special agents and other investigators.

Not all inspectors general have law enforcement powers to search, seize and arrest. However, all four special IGs are law enforcement offices. This includes SIGTARP, SIGPR, and special IGs for Iraq and Afghanistan Reconstruction.

Special IGs have not historically investigated legal or ethical violations by federal employees. They have instead conducted criminal and civil investigations of those receiving federal rescue dollars or those conducting rescue fraud scams.

SIGTARP staffs investigations with special agents, analysts and attorney investigators. We leverage our resources by partnering with other law enforcement offices, for example, other inspector general investigators, the FBI and IRS-Criminal Investigations.

We work hand in hand with the U.S. Department of Justice and some state and local prosecutors to support prosecutions. SIGTARP's focus on justice and accountability of TARP recipients promotes confidence of the American people and markets that TARP dollars go where intended.

2. A special IG can stop, detect and deter fraud and other crimes or civil violations of the law that harm the goals of the federal rescue program. SIGTARP has largely focused on individual accountability, although it has investigated some of the largest banks and other corporations that participated in TARP.

As a law enforcement office, a special IG can stop, detect and deter violations of the law that harm the goals of the federal rescue program. The 443 individuals criminally charged resulting from a SIGTARP investigation come from multiple industries because TARP spanned multiple industries. Individual defendants include 106 bankers, 98 of their co-conspirators, 58 bank borrowers, 120 operators of rescue fraud scams, along with lawyers, securities traders, other professionals, contractors, and homeowners.

We have a 97 percent DOJ conviction rate, and we have had many successful trials. Courts have sentenced 302 defendants to prison (including 77 bankers), reflecting the seriousness and scope of the crimes we uncovered. Regulators banned 81 bankers.

SIGTARP also investigates corporations. The DOJ, the U.S. Securities and Exchange Commission, the Federal Deposit Insurance Corporation and other regulators have brought enforcement actions against 24 financial institutions or companies investigated by SIGTARP, including some of the largest banks that received TARP.[1] 

3. Crisis-related crimes are crimes of opportunity, and a special IG's expertise in federal programs and participating industries reduces and catches crime, and mitigates vulnerabilities to fraud and waste.

Crime will always accompany large federal rescue programs, but a special IG can help reduce and catch that crime, and mitigate vulnerabilities to fraud and waste. SIGTARP is an expert in TARP programs and participating industries including banking, securities, autos and housing. Expertise in bailed out industries means our investigators can see the same opportunities that criminals see, and our auditors can identify risk of fraud and waste to recommend how to mitigate vulnerabilities.

Because we know where and how to look for fraud, waste and abuse, we can be proactive in our search. We developed an innovative and analytical process to identify red flags, industry/company trends, and anomalies that can indicate potential fraud. We combine this fraud detection program with tips and referrals. Through SIGTARP's sustained and dedicated law enforcement and auditing, we have been able to reduce TARP-related crime and mitigate vulnerabilities to fraud and waste.

4. A special IG can create new precedent — SIGTARP used its specialized expertise to catch a new type of crime in banks.

The Department of Justice brought landmark novel prosecutions resulting from SIGTARP's investigations as SIGTARP caught a new type of bank-related crime — bankers who cooked the books and lied to regulators and investors to hide bad loans and the bank's declining financial condition.

Since the savings and loan crisis, bank fraud prosecutions have targeted bankers who personally profited from fraud, despite the fact that personal profit is not an element of bank fraud. That was no longer the case after SIGTARP investigated many bankers prosecuted for defrauding regulators and shareholders without personally profiting.

While we also investigate bankers who personally profited from their crimes, the cases without personal profit have established a new precedent for bank fraud, securities fraud and other crimes in banks. This new precedent can keep the banking industry safe, now and in the future.  

5. Special IGs follow the money, and do not have monetary thresholds to investigate or audit.

SIGTARP has been dogged in deterring, detecting and investigating or auditing those who would take advantage of TARP programs and funds. SIGTARP follows the money through to the recipients. We combine this tracking with intelligence that we gather about the recipients and their industries to provide leads to open an investigation or an audit.     

More than $11 billion has been recovered from SIGTARP's work, representing a 31-times return on investment from our annual budgets. Some of these recoveries help repay TARP losses when the bank failed or the fraud left the bank or other company unable to repay TARP.

Although many of our cases have involved multimillion- or multibillion-dollar frauds, special IGs do not maintain dollar thresholds in deciding when to investigate or audit. We have investigated and audited lower TARP dollars in areas of high risk where we wished to deter future fraud, waste or abuse.

For example, we actively investigate corruption in TARP-related contract bids or awards, including bribes of any amount. We also audited a Nevada nonprofit that wasted TARP funds meant for homeowners to host a December holiday party at a casino in Las Vegas.

We uncovered waste by state agencies and nonprofits in spending TARP on parties, gifts, lavish dinners, boondoggle conferences, country clubs, even a Mercedes Benz, rather than distributing those dollars to homeowners for foreclosure prevention assistance. Even though each example of waste was not a substantial dollar loss to TARP, collectively it added up to $11 million, and we wanted to deter future waste, save taxpayer dollars and protect the integrity of the program.

Like SIGTARP, it will take some time to see the full results of SIGPR, as investigations and audits come after spending, and successful law enforcement takes time. We at SIGTARP will be rooting for their success.    



Christy Goldsmith Romero is special inspector general for the Troubled Asset Relief Program, created following the 2008 financial crisis. She was nominated by President Barack Obama and sworn into office in 2012.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.


[1] To see a database of all convicted defendants and the 24 companies, SIGTARP has created the Crimes & Fines Database, which can be accessed here.

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