TARP Fraud

Serving Clients Nationwide

In response to the 2008 financial crisis, the federal government created the Troubled Asset Relief Program (TARP) in an effort to stabilize financial institutions and other companies whose failure would severely impact the economy of the United States. TARP has since provided hundreds of billions of dollars to companies in various sectors of the economy, including banks, insurance companies, and auto manufacturers. However, the goals of the program remain unclear, criteria for inclusion in TARP are still mostly unknown, and there is little oversight of the very few regulations governing how TARP funds can be used. Therefore, the potential for fraud in securing TARP funds is extremely high.

Because TARP is funded by the federal government, fraud committed in applying for TARP funds or other fraudulent activities that result in payment of TARP funds constitute violations of the False Claims Act. As such, any entity that commits TARP fraud may be liable in the case of a qui tam lawsuit brought under the False Claims Act. The first conviction for TARP fraud based on a qui tam action was delivered in March of 2010.

TARP Programs

Currently, TARP consists of four programs under which companies can receive federal funds. These are:

• Capital Purchase Program (CPP), the largest of the four, is intended to provide temporary capital for “Qualifying Financial Institutions” (QFIs). The QFI enters into a contract with the government under which the government buys securities and other assets that the QFI may later repurchase. While it includes some restrictions on executive compensation, CPP offers few guidelines as to how TARP funds may be used.
• Making Home Affordable Program (MHAP) is designed to reduce foreclosure rates by guaranteeing home loans and other financial assistance with the goal of increasing loan refinancing as an alternative to foreclosure. MHAP also provides additional financial assistance for providing foreclosure alternatives and loan modifications.
• Targeted Investment Program (TIP) is the program that provides bailout funds to corporations deemed “too big to fail” because of their importance to the economy. Only Citigroup and Bank of America are TIP participants, with AIG included as a “systemically significant” failing institution.
• Automotive Industry Financing Program/Automotive Supplier Support Program, designed to facilitate the corporate restructuring of Chrysler and General Motors, places strict limits on spending and executive pay and other requirements for restructuring.

If you have knowledge that any TARP participant falsified information in its application for TARP funds or is using TARP monies in violation of the requirements established by the program, you may be able to bring a qui tam lawsuit to reclaim taxpayer funds under the False Claims Act. As a whistleblower, you would be helping taxpayers get a portion of the bailout money back and become eligible for a whistleblower reward if the case is successful.

If you have knowledge of a fraud or false claim against the government, please contact our qui tam lawyers today. Kenney & McCafferty attorneys will consult with you about your case, without obligation. All communications with Kenney & McCafferty attorneys during these consultation services are confidential and protected by the attorney-client privilege.