Multiple Probes of Bailout Underway

WASHINGTON -- A government watchdog has launched "almost 20" criminal investigations related to the $700 billion financial bailout program, according to a report to Congress to be released today.

Neil Barofsky, the special inspector general for the rescue program, says in the report that the probes involve possible public corruption; corporate, stock and tax fraud; insider trading; and mortgage fraud. Barofsky provided no information on who is being investigated or why, saying details will not be released "until public action is taken."

The special inspector general's office is focusing on possible wrongdoing by recipients of money under the Treasury Department's Troubled Asset Relief Program (TARP).

"Those who make intentional misrepresentations in the TARP application process or in their financial reporting to Treasury may be in violation of several criminal statutes," the report says.

In an interview with National Public Radio this month, Barofsky said one probe involves bank officials who were allegedly "cooking their books" to qualify for rescue funds. He did not name the bank.

Charles Clark, a lawyer with the firm Kirkland & Ellis, said banks that got TARP money worry that they could be prosecuted for conduct they thought was legal at the time. "Companies are fearful that the regulatory structure could be built on the backs of criminal defendants," said Clark, who helped direct the Securities and Exchange Commission's investigation of Enron eight years ago.

The report, the most extensive account of Barofsky's work since he took office in December, also provides new details on the agency's audits, which are separate from criminal investigations. A previously announced audit of the Treasury Department's decisions to invest $45 billion in Bank of America will be expanded to include the first nine firms that got taxpayer money, the report says.

In addition, the inspector general's report says an audit of the $165 million in bonuses to executives at American International Group also will examine Treasury's oversight of bonuses and other executive perks at all firms that received bailout money. News of the bonuses created a furor in Congress and prompted the company to call on its executives to pay the money back. Another audit by Barofsky's office is examining AIG's payments to its partners in some risky investments -- mostly banks and other financial companies, including some foreign firms.

AIG said in an SEC filing Monday that it had complied with unspecified requests from Barofsky's office.

The Treasury Department has committed to spend $590.4 billion of the $700 billion allocated to the program since it began in October, Barofsky's report says. Firms receiving rescue money have paid more than $3.1 billion in dividends and interest to the government so far, the report says.