The U.S. government's bank bailout program paid more than $9 million in legal fees to law firms that submitted questionable bills with little or no details on services provided, the agency's watchdog said in a report released on Thursday.
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The Special Inspector General for the Troubled Asset Relief Program (SIGTARP) said auditors questioned $8.1 million of a sampling of $9.1 million in bills from four law firms paid by Treasury's Office of Financial Stability (OFS).
The firms submitted bills with either no descriptions or vague descriptions of the work performed, unsupported expense charges, and administrative charges that were not allowed under their contract, SIGTARP said.
The most striking examples of problematic bills were from Simpson Thacher & Bartlett LLP, the report said.
"Simpson Thacher billed OFS $5.8 million in fees and expenses with bills that provided no detail whatsoever as to the work performed," the report said.
Later in the report, however, SIGTARP mentions that Simpson Thacher provided corporate law advice related to bank bailout investments and the sale of Citigroup (NYSE:C) stock.
The watchdog, which investigates waste and fraud in the bailout program, also examined bills from Cadwalader Wickersham & Taft LLP, and Locke Lord Bissell & Liddell LLP and Bingham McCutchen LLP, formerly McKee Nelson LLP.
The report pointed out that although auditors questioned bills from all of the law firms, it did not mean that all of the fees and expenses were unreasonable.
"These services were of high quality and critical to the success of our programs," Treasury Department spokesman Mark Paustenbach said. "We believe the procedures we followed ensured that taxpayers received good value."
As of March, the office that runs TARP had paid the four firms legal fees and expenses totaling more than $25.5 million, the audit said.
"OFS should determine the allowability of $7,980,215 in unsupported legal fees and expenses paid to the law firms," it concluded.
The report also recommended that Treasury try to recover $91,482 in "ineligible" fees and expenses paid to Simpson Thacher.
But the report did not question the quality of legal work done by the firms and noted that Treasury negotiated billing rates equal to or lower than those obtained by other federal agencies and substantially lower than the respective firms' standard rates.
The audit is the watchdog's final report on OFS's management of contracts with five law firms from 2008, when TARP began, to March 31 of this year.
A preliminary report was issued in April after auditors found similar problems with legal bills from Venable LLP -- the first of the five firms' bills to be audited.