Dispute Erupts Over Bailout Inspector General's Independence

By Amit R. Paley and Ed O'Keefe
Washington Post Staff Writers
Friday, June 19, 2009

The special inspector general charged with overseeing the $700 billion bailout of the financial sector says he has been told by the Treasury Department that the agency has legal authority over his office, a claim that could threaten its independence.

Neil M. Barofsky, who is overseeing the bailout, wrote in an April 7 memo that the department would ask the Justice Department Office of Legal Counsel to sort out the issue.

Barofsky is unsure why the dispute arose and is concerned that it could threaten the independence of his office, according a person with knowledge of the matter. The person said that Barofsky said the office's legal opinion is unnecessary.

A Treasury official said the department believes that putting Barofsky's office under the supervision of the secretary will be helpful to the agency and give it privileges the office would not otherwise have.

"The request to clarify the SIGTARP's complex legal status within the executive branch was sent to the Department of Justice only after Department of Treasury consulted with Mr. Barofsky who had no objection," Andrew Williams, a Treasury spokesman, wrote in an e-mail, using the acronym for the watchdog agency's official title, the Special Inspector General for the Troubled Assets Relief Program.

Kristine Belisle, a spokeswoman for the inspector general, said the office would not comment.

Sen. Charles E. Grassley of Iowa, the ranking Republican on the Finance Committee, sent a letter to Treasury Secretary Timothy F. Geithner this week expressing concern about "potentially serious questions this issue raises about Treasury's respect for the [special inspector general's] independence and authority to access documents." He asked Geithner to explain his views by next week.

Grassley's inquiry is the latest by lawmakers regarding the independence of inspectors general.

President Obama's decision to dismiss Corporation for National and Community Service Inspector General Gerald Walpin piqued concern that the firing was related to his 2008 investigation into the potential misuse of AmeriCorps grants to the St. HOPE Academy of Sacramento. The group was founded by former NBA star Kevin Johnson, mayor of Sacramento and an Obama supporter. The White House responded by releasing letter providing several reasons for the dismissal.

Grassley also has raised concerns about potential interference with the work of inspectors general at the Library of Congress and the International Trade Commission. Top officials at the ITC removed Inspector General Judith Gwynn this week after Grassley inquired about a March incident involving an employee allegedly taking files. At the library, leadership allegedly interfered with internal investigations.

The commission and library's watchdogs are hired by agency leadership, unlike Barofsky and Walpin, who are presidential appointees.

"What I think we're seeing really is the reality that all White Houses really try to aggressively protect their privilege as much as they can," said Danielle Brian, executive director of the Project on Government Oversight. "I think there's been a perception that this had been a uniquely Bush-Cheney phenomenon, and I think you're seeing it [in this administration] too."

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