TARP: Let a Thousand Lawsuits Bloom

Alison Frankel writes in the Am Law Litigation Daily, Are Whistle-Blowers Lurking Under the Federal TARP?:

There were few regulations in place when the Treasury Department handed out the first $350 billion. Can the recipients be accused of making false claims when they hardly had to document their claims at all?

Yes, according to a new Fried Frank client alert. The three-page analysis by D.C. partners John Boese and James McCullough points to a letter that TARP special inspector Neil Barofsky recently sent to Iowa senator Chuck Grassley, outlining certifications and documentation that TARP intends to require of all those institutions that received funding. “False certifications,” the Fried Frank alert warns, “have been the basis for FCA claims when they were material to the government's decision to release funds or not to seek return of funds.”

Boese told us that the new paperwork requirements will impose post hoc rules for recipients, heightening their exposure. “Qui tam claims are almost a certainty,” Boese said. “Whether there's liability, that's a different question.”

Fried Frank's client memo also notes that the Treasury Department's interim conflict-of-interest and disclosure rules for contractors and financial agents may mean new False Claims Act exposure for businesses that provide TARP-related services, which are required to report any potential violations to the government.

It might be nice to see some of the hogs at the trough get…well trimmed at least.

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