The TARP itself may be the biggest fraud of all, but Inspector General Neil Barofsky said today that he’s already examining 20 potential cases of criminal fraud having to do with the program:
LAT: Barofsky said the complex nature of the bailout program makes it “inherently vulnerable to fraud, waste and abuse, including significant issues relating to conflicts of interest facing fund managers, collusion between participants, and vulnerabilities to money laundering.”
The report said little about who is under investigation and how the fraudulent schemes work, but investigators are already on alert for a long list of potential scams. Such schemes could include obtaining bailout money under false pretenses, bilking the government with phony mortgage modifications, and cheating on taxes with fraudulent filings.
“You don’t need an entirely corrupt institution to pull one of these schemes off,” Barofsky said. “You only need a few corrupt managers whose compensation may be tied to the performance of these assets in order to effectively pull off a collusion or a kickback scheme.”
Felix Salmon plucked out another interesting tidbit from Barofsky’s report. He worries that the PPIP could be come an avenue for money laundering. And we’re not talking about “laundering”, where banks buy toxic assets from one another using government money. We’re talking laundering-laundering:
Because of the significant leveraging available and the inherent imprimatur of legitimacy associated with PPIP and TALF, these programs present an ideal opportunity to money-laundering organisations. If a criminal organisation can successfully invest $10 million of illicit proceeds into a PPIF, not only does the organiza- tion enjoy the possibility of profi ting through the Government-backed leverage, but any eventual distributions from the PPIF are successfully laundered because they appear to be PPIF investment gains rather than drug, prostitution, or illegal gambling proceeds.
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