Prepared Remarks of Former Special Inspector General for the Troubled Asset Relief Program (“SIGTARP”) Neil M. Barofsky Before the U.S. Senate Committee on Homeland Security and Governmental Affairs (Part IV of IV)

by Neil M. Barofsky

These remarks have been edited for length and are being published in four parts. The following post is Part IV of Neil M. Barofsky’s prepared remarks, which were delivered on July 28, 2020. For Part I of this post, click here. For part II, click here. For Part III click here. 

With so much public money at stake, it is critical that Congress do what it can to ensure that government aid is not being stolen, wasted, or given to political cronies.  It is just as critical, as already noted, that taxpayers are aware of how and to whom their money is being distributed.  In the CARES Act, Congress demanded comprehensive oversight to guard government aid, and provided what was described as overlapping and redundant oversight entities to ensure full coverage.  It also included some conflicts of interest provisions intended to prevent government officials and their families from benefitting from certain programs.

Congress’ demands have not been met.  We were promised three oversight bodies, but each one has been hamstrung, albeit in different ways.  First, overseeing the actions of Treasury with respect to the $500 billion discussed above, the legislation promised a brand-new agency, modeled on the one that I used to lead, headed by a Special Inspector General for Pandemic Recovery (“SIGPR”).  We were promised that this new agency would keep the programs on the right policy track, protect them from fraud, and provide the necessary transparency to make sure that when decision makers fall short, as they inevitably do in the haste of an emergency, SIGPR could make quick recommendations to correct course and share both the flaws and the proposed solutions with Congress and the American people.  SIGPR—like SIGTARP—is supposed to shine a light on the decision-making processes, deterring policymakers from making decisions that are likely to determine which companies survive and which fail based on personal connections or cronyism, rather than on the merits. Unfortunately, there was a months-long delay in appointing and confirming Brian Miller as the SIGPR, meaning that many of the programs and processes I have discussed today were developed and implemented without key input by this position.

Although SIGPR was modeled after the agency I founded, the CARES Act failed to incorporate some of the key legislative amendments I was able to obtain for SIGTARP to put it in a position to succeed, including broad hiring authority to allow it to staff up in a hurry to be in a position to conduct the robust oversight required.[1]  SIGPR is further hampered by a budget only half the size designated for SIGTARP, as well as by President Trump’s signing statement to the CARES Act, in which he suggested he would limit the ability of the new IG to reveal to Congress efforts by his administration to obstruct or impede his inquiries.  If undertaken, this directive would prevent SIGPR from using one of the most powerful tools that SIGTARP had to ensure agency compliance with our document and information requests.  Even if not acted upon by the President, that signing statement, along with other actions taken by the administration detailed below, has the potential of signaling to Treasury and other federal agencies that cooperation with requests from SIGPR or other oversight agencies is purely optional.  Although little has yet been made public about the priorities and actions of SIGPR during its startup period, and whether it is receiving full cooperation from the administration, its first 60-day report, which should be filed in the coming weeks, should be telling.

Second, the CARES Act created a new Pandemic Response Accountability Committee (“PRAC”) to oversee the government’s response to COVID-19, including the programs described above.  The PRAC consists of IGs from various government agencies along with full-time staff devoted to overseeing, auditing, and investigating any fraud, waste, abuse, or mismanagement within the government’s response.  The PRAC is also under threat.  In late March, after the widely respected Acting IG for the Defense Department, Glenn Fine, was named as the PRAC chairman, President Trump replaced him as IG for Defense, with little substantive explanation.  This disqualified Fine from serving as PRAC’s Chairman, leaving the committee leaderless until Department of Justice IG Michael Horowitz took over in an acting capacity.

Fine, of course, is not the only IG to come under fire, with acting Health and Human Services IG Christi Grimm coming under withering criticism from the President (along with the intent to replace her) after she issued a report critical of the administration’s handling of the crisis.[2]  Similarly, State Department IG Steve Linnick was fired by President Trump simply because he “was asked by [the Secretary of State, who at time was under investigation by Linnick] to do so,”[3] and Michael Atkinson (Intelligence Community) was fired in apparent retaliation for providing certain information to Congress.[4]  Although one may quibble with any one of these actions, taken together they can only send one message to the watchdogs that must to play a crucial role in overseeing the government’s pandemic response: Criticize the programs at your peril.

Not only does this course of conduct chill robust oversight by those charged under law with that responsibility, but much like the President’s signing statement, it risks signaling to agencies that they can disregard requests for information or recommendations that come from IGs, and that they can even have the more meddlesome ones removed.  Indeed, following Fine’s removal (and, of course, the signing statement), Treasury took the untenable position that it would block PRAC from overseeing funds disbursed under Division A of the CARES Act (which includes PPP and the Federal Reserve programs, among others), and denied PRAC access to relevant information.  As with its position on withholding all PPP data described above, however, Treasury ultimately backed down on its position in the face of widespread criticism and agreed that PRAC’s jurisdiction extended to those key programs.  Yet, despite that change of position at Treasury, it appears that the Office of Management and Budget (“OMB”) is separately refusing to direct agencies to collect information that PRAC needs to fulfill its reporting and disclosure mandate under the CARES Act,[5] thereby threatening its ability to function effectively.

In order to ensure robust oversight from the IG community, Congress must act.  An important start is passing the Securing Inspector General Independence Act of 2020, a bipartisan bill co-sponsored by Ranking Member Peters, and Senators Carper, Hassan, Lankford, Peters, Portman, and Romney of this committee, among others.  Its requirements, including a broad prohibition against the previously unimaginable practice of having existing agency executives also serve as acting IGs of their agency, include necessary reforms that should be implemented immediately.  I would also strongly endorse similar legislation that mandates that IGs can only be fired for cause.

Overall, Congress needs to be more vocal and proactive in its support of the watchdogs.  When I was at SIGTARP, it was not uncommon, particularly in our early days, for federal agencies to disregard my recommendations or to create some legal construct in order to block me from receiving information that I needed to fulfill the role that Congress had created.  But, in each instance, we were able to overcome such resistance due to the fierce bipartisan support we received in Congress.  Any complaint by an agency that we were motivated politically was briskly swatted away when the Committee Chairs and Ranking Members of both parties came to our defense.  And when a series of our recommendations regarding a proposed Treasury/Federal Reserve program were ignored, Senators Boxer, Ensign, Pryor, and Snowe joined hands across the aisle to cosponsor a bill to adopt those recommendations that was passed without a single dissenting vote.  The reality is that Congress can impose as many watchdogs and oversight entities as it wants, but for oversight to be effective, Congress has to back them up.  Otherwise, they will be ignored and discarded.  I applaud Chairman Johnson and Ranking Member Peters for calling this hearing as an important step in signaling the importance of robust, independent oversight, but much more still must be done.

Third, the CARES Act established a Congressional Oversight Commission (“COC”) patterned on the Congressional Oversight Panel from the TARP legislation.  And although four of the five commissioners have been appointed, it is now four months and counting without an appointed Chair.  Although the commissioners deserve great credit for putting out reports and even scheduling an upcoming hearing without the benefit of a Chair, the COC cannot function as a robust oversight body without a fully installed Chair, and the staff and guiding vision that comes with it.  Furthermore, the COC’s ability to be effective could be greatly enhanced by giving it subpoena power—its predecessor’s lack of such authority inhibited its effectiveness.  And given the concerns regarding the limited resources attending to oversight of the PPP program discussed above, Congress should consider expanding the COC’s jurisdiction to include that program as well.

Finally, Congress should consider expanding the conflict of interest provisions in the CARES Act.  The TARP program certainly had its challenges and failures, but the strong conflict of interest provisions helped ensure program integrity.  Although, as noted above, the CARES Act includes certain baseline provisions, there is simply no reason it should not include restrictions at least as robust as those in the TARP program.

Footnotes

[1] At SIGTARP, we were able to navigate through our early days due to a series of exemptions that we received from the Office of Personnel Management that freed us temporarily from the hiring restrictions that are incompatible with starting up an agency during a crisis.  But reliance on another executive agency is a potential impediment to independence, particularly if OPM denies necessary relief or threatens to pull it after a negative report, both circumstances which we had to deal with before the Special Inspector General for the Troubled Asset Relief Program Act of 2009 was enacted by Congress.

[2] See Lisa Rein, Trump Replaces HHS Watchdog Who Found ‘Severe Shortages’ at Hospitals Combating Coronavirus, Wash. Post, May 2, 2020, available at https://www.washingtonpost.com/politics/trump-replaces-hhs-watchdog-who-found-severe-shortages-at-hospitals-combating-coronavirus/2020/05/02/6e274372-8c87-11ea-ac8a-fe9b8088e101_story.html.

[3] See White House, Press Release, Remarks by President Trump in a Roundtable with Restaurant Executives and Industry Leaders (May 18, 2020), available at https://www.whitehouse.gov/briefings-statements/remarks-president-trump-roundtable-restaurant-executives-industry-leaders/.

[4] See Ellen Nakashima, Inspector General Who Handled Ukraine Whistleblower Complaint Says ‘It Is Hard Not to Think’ Trump Fired Him for Doing His Job, Wash. Post, Apr. 6, 2020, available at https://www.washingtonpost.com/politics/inspector-general-who-handled-ukraine-whistleblower-complaint-says-its-hard-not-to-think-he-was-fired-by-trump-for-doing-his-job/2020/04/06/083166de-77b4-11ea-b6ff-597f170df8f8_story.html.

[5] See Coalition Letter to Russell Vought, Acting Director of OMB (June 18, 2020), available at https://ourfinancialsecurity.org/wp-content/uploads/2020/06/Coalition-letter-to-OMB-on-COVID-disclosure-6-18-20.pdf (PDF: 144.16 KB).  The details surrounding this issue are described in greater detail in my co-panelist Danielle Brian’s testimony.

Neil M. Barofsky is a partner, chair of the Monitorship Practice, and head of the COVID-19 Response Team at Jenner & Block. He previously served as a federal prosecutor and the first special inspector general of the Troubled Asset Relief Program (TARP).

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