TARP Paid Millions in Unsupported Legal Fees, Report Says

The special inspector general for the Troubled Asset Relief Program said auditors questioned $8.1 million of a sampling of $9.1 million in bills from four law firms paid by Treasury’s Office of Financial Stability.

The firms submitted bills with either no descriptions or vague descriptions of the work performed, unsupported expense charges and administrative charges that were not allowed under their contract, the inspector general’s report said.

The most striking examples of problematic bills were from Simpson Thacher Bartlett, the report said.

“Simpson Thacher billed O.F.S. $5.8 million in fees and expenses with bills that provided no detail whatsoever as to the work performed,” the report said.

Later, however, the report mentions that Simpson Thacher provided corporate law advice related to bank bailout investments and the sale of Citigroup stock.

In a statement that made no direct reference to the report, Simpson Thacher said “Our team of highly qualified lawyers worked closely with the Treasury staff on a daily basis to structure and implement TARP programs that played a key role in stabilizing the U.S. financial system.”

The watchdog, which investigates waste and fraud in the bailout program, also examined bills from Cadwalader Wickersham Taft, Locke Lord Bissell Liddell and Bingham McCutchen, formerly McKee Nelson L.L.P.

The report said that although auditors questioned bills from all of the law firms, it did not mean that all of the fees and expenses were unreasonable.

“These services were of high quality and critical to the success of our programs,” a Treasury Department spokesman, Mark Paustenbach, said. “We believe the procedures we followed ensured that taxpayers received good value.”

As of March, the office that runs the relief program had paid the four firms legal fees and expenses totaling more than $25.5 million, the audit said.

“O.F.S. should determine the allowability of $7,980,215 in unsupported legal fees and expenses paid to the law firms,” it concluded.

The report also recommended that Treasury try to recover $91,482 in “ineligible” fees and expenses paid to Simpson Thacher.

But the report did not question the quality of legal work done by the firms and noted that Treasury had negotiated billing rates equal to or lower than those obtained by other federal agencies and substantially lower than the respective firms’ standard rates.

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