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Pending OLC Opinion Request On Geithner's Power To Supervise The TARP IG:

The Judiciary Act of 1789 authorizes the Attorney General to advise the President and executive agencies on questions of law. The Attorney General has delegated that responsibility to the Office of Legal Counsel. It is unusual, but not unprecedented, for people outside the government to learn of an OLC opinion request before advice is provided and a decision is made whether to publish the resulting opinion, a process that can take a year or more. But thanks to an outspoken Inspector General (there are just enough exceptions to the stereotype to save that phrase from utter redundancy), the public has a ringside seat to a pending OLC opinion request by the Department of the Treasury involving the Secretary's authority to supervise the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), Neil Barofsky.

According to a letter from Senator Grassley to Secretary Geithner (itself apparently based on reports from a source in the SIGTARP office) with a CC to Barofsky, Barofsky's response to Senator Grassley and Representative Darrell Issa, and a memo from Barofsky to Treasury Acting General Counsel Bernard J. Knight, Jr., that has become public, in probably late March or early April 2009, Treasury officials balked at providing certain documents SIGTARP had requested based on concerns that giving them to the IG would constitute a waiver of attorney-client privilege. The issue came to head in connection with SIGTARP's planned interview of a Treasury official regarding payments to AIG's Financial Products unit. As a result, on April 2, Acting GC Knight emailed Barofsky that he sought to obtain an opinion from OLC on three subjects:

Whether SIGTARP is within the Department of the Treasury;

Whether the Secretary of the Treasury has supervisory authority over SIGTARP;

If SIGTARP is not part of Treasury, whether providing Treasury's attorney-client privileged materials to SIGTARP effectively waives the privilege.

While Knight quickly addressed Barofsky's request for the documents (and Barofsky recently has stated that he has received all the documents he needs from Treasury), Treasury proceeded with its opinion request. While Barofsky turned over the email traffic involving Knight and OLC to Senator Grassley and Representative Issa, he redacted certain portions at OLC's "insistence" "to avoid interfering with its ongoing consideration of the questions that have been presented to it." (OLC's request to redact is consistent with long practice, which is not to release information that can affect the Executive Branch's deliberative process.)

Based on representations in SIGTARP's April 7 memo, Treasury apparently takes the position that SIGTARP is within the Executive Branch, but may question whether SIGTARP is actually within Treasury. In its April 7 memo, SIGTARP argued that the office is an independent entity within Treasury that is not subject to supervision by the Secretary of the Treasury; that privileges do not excuse compliance with an IG's request for materials; and that response to an IG's request is not voluntary and thus is not a waiver.

SIGTARP was created by section 121 of the Emergency Economic Stabilization Act of 2008 (EESA), as amended by Pub. L. 111-15, enacted earlier this year. Before broadband, you were asking for trouble to run an allfeds Westlaw search of "act" or "law" w/5 "not a model of clarity," and that already bloated search result will only grow as EESA works its way through the courts. Section 121 of the EESA does not explicitly state what Department the SIGTARP is in, or, for that matter, whether it is even in the Executive Branch.

It seems likely that if OLC writes an opinion (more on that later), it will conclude that SIGTARP is within Treasury and thus within the Executive Branch. SIGTARP performs the traditional functions of an IG, and section 101 of EESA vests Treasury with the job of administering TARP; thus, absent a statement to the contrary, one would expect SIGTARP to be created within the agency it monitors following the usual model of the IG Act. (The opposite argument, of course, is that an inference should be drawn from the fact that Congress omitted from EESA the usual language creating the IG Office within a particular "establishment" of the Executive Branch.) There is other evidence SIGTARP is within Treasury, although you have to cull bits and pieces from EESA, none of it particularly compelling in isolation: Treasury's budget is the source of SIGTARP's funding; the EESA incorporates the removal provisions of the IG Act of 1978, which speaks of transferring the IG to "another position within an establishment," suggesting the IG position is within the establishment; by incorporating provisions of the original IG Act of 1978, EESA requires the SIGTARP to keep the Treasury (as well as Congress) informed about its findings; the SIGTARP has offices at Treasury (and the original IG Act specifies that the head of an establishment is to provide the IG office space). SIGTARP and Treasury have been operating on the understanding that the office is part of Treasury, and there is precedent that agency practice is relevant in construing an ambiguous statute, but that consideration would be given less weight given that EESA is not even a year old and practice therefore is not longstanding.

The conclusion that SIGTARP is part of the Executive Branch (and, indeed, is part of Treasury) would ordinarily answer for OLC the question that appears to have precipitated the opinion request: whether turning over documents will result in a waiver of attorney-client privilege. The questions, as framed in the April 7 memo, implicitly recognize that conclusion. Both the attorneys and the SIGTARP ultimately are agents of the same client, and so provision of the documents would not result in a waiver of the privilege.

The hardest question is whether SIGTARP is subject to supervision by the Secretary of the Treasury. Congress was not terribly clear in incorporating elements from the IG Act of 1978. Congress incorporated some provisions by specific reference or by duplicating the language of the original IG Act (e.g., the removal provisions of IG Act section 3(b); rates of pay; application of a particular Hatch Act exception for policymakers; powers and authorities; compliance with Comptroller General audit procedures). So far so good. EESA does not, however, explicitly incorporate the most relevant provision of the original IG Act, section 3(a), which states in relevant part that "[e]ach Inspector General shall report to and be under the general supervision of the head of the establishment involved or, to the extent such authority is delegated, the officer next in rank below such head, but shall not report to, or be subject to supervision by, any other officer of such establishment."

While the EESA does state that "the Inspector General shall also have the duties and responsibilities of inspectors general under the Inspector General Act of 1978," it is not self-evident that the IG Act's provision for (and limitations on) secretarial supervision establishes a "duty or responsibility" of inspectors general. Although SIGTARP seems to be quite adamant that that sentence of 3(a) does not apply to the office, if it does not, presumably, neither would the last sentence of the provision: "Neither the head of the establishment nor the officer next in rank below such head shall prevent or prohibit the Inspector General from initiating, carrying out, or completing any audit or investigation, or from issuing any subpena during the course of any audit or investigation." I am aware of no comparable noninterference provision in EESA, but it is a big statute.

Although there are question marks over the applicability of the IG Act's supervision provisions, it strikes me as unlikely that OLC would conclude that the SIGTARP is completely "independent" of secretarial supervision. The ordinary presumption is that an agency head supervises those in the agency, and there are various provisions of law that embody that background presumption. The explicit provisions of section 3(a) of the IG Act were designed to define the limits of supervision within an agency. While SIGTARP notes that the EESA does not make explicit provision for "supervision," its text is similarly silent about "independence." In the Executive Branch, it seems likely that such silence will be construed in favor of supervision rather than a lack of supervision; if Congress wants to exempt an official from supervision by the head of an agency, it is easy enough, given the separation of powers implications of interfering with another branch's traditional supervision structure, for it to say so explicitly. I understand that there is some legislative history from Senator Baucus indicating that he intended for the office to be "truly independent," and that is something OLC will have to consider. (There may be more, but I haven't been able to exhaustively search the legislative history.) I don't imagine that OLC will give the statement tremendous weight, because individual floor statements rank relatively low in terms of persuasiveness for legislative history, which is itself disfavored in an age when plain language is ascendant.

The actual phrasing of the Treasury request is critical, because if it is quite general (as in the SIGTARP letter: "Whether the Secretary of the Treasury has supervisory authority over SIGTARP"), OLC may not be forced to confront far thornier specific applications of that supervisory authority, such as whether agency head may, for example, order SIGTARP to redact privileged communications from the version of the report that is finalized and delivered to Congress. If Treasury was (as Sen. Grassley's letter suggests) concerned about waiver of attorney-client privilege, it may not be particularly enthusiastic about such communications winding up in the final report.

The thorny and politically explosive issue of IG supervision will give both Treasury and DOJ an incentive to try to resolve the matter short of a formal opinion. So if the parties have reached an accommodation that allows Barofsky to move forward with his immediate duties (as Barofsky's letter suggests), I would not be surprised if a decision is made not to finalize an OLC opinion on the subjects outlined above.

martinned (mail) (www):
Issues like this show why the cases &controversies requirement of Article III isn't necessarily a good idea. In many other countries, this issue would be resolved by a - to some extent binding - advisory opinion by the constitional court.
6.25.2009 8:24am
Eli Rabett (www):
Is the TARP within the Department of the Treasury or is it an independent function of the Executive outside of the Treasury, but supervised by the Secretary? After you cut through the verbiage this appears to be the underlying question.
6.25.2009 9:19am
rosetta's stones:
At the top of your essay, before you even get to the lawyering rap, this seems to be the core of the issue:


"...Treasury officials balked at providing certain documents SIGTARP had requested based on concerns that giving them to the IG would constitute a waiver of attorney-client privilege. The issue came to head in connection with SIGTARP's planned interview of a Treasury official regarding payments to AIG's Financial Products unit."


A branch of government claiming attorney-client privilege against info. requests from an IG, and from another branch of government?!

I can see reasons to restrict information flow, national security among them, but attorney-client privilege isn't one, no matter who the IG works for. Fine to argue what the law says, but at the end of the argument, that information has to be made public, and made available to the People.

It's amusing, but sad, that the lawyers have created a huge K-Street organism to influence the legislative and executive branches, fully shielded by attorney-client privilege, and now it appears this same sorta process is working its way even into the frickin' bureaucracy.

Sunlight. That is the only legitimate path here. Every email to and from AIG. Every set of meeting minutes. All posted on the web.
6.25.2009 9:42am
martinned (mail) (www):
@rosetta's stones: Did you feel the same way about the torture memos? Or does that fall under the national security exception? (I agree, by the way, with your comment on this case.)
6.25.2009 9:47am
Eric Rasmusen (mail) (www):
It looks to me as if for the present purpose, Geithner loses with either of the two reasonable legal theories:

(1) If we go with EESA and not the IG Act of 1978, then the TARP IG is responsible only to the President, so Geithner can't curtail his investigation.

(2) If we go with the IG Act of 1978 and not EESA, then the TARP IG is responsible to the Secretary of the Treasury, not the President, but section 3(a) applies and Geithner can't curtail his investigation. Section 3(a), as quoted in the post, says: "Neither the head of the establishment nor the officer next in rank below such head shall prevent or prohibit the Inspector General from initiating, carrying out, or completing any audit or investigation, or from issuing any subpena during the course of any audit or investigation."

There is a constitutional question, in addition, of whether the President directly can curtail an IG investigation. I should think he can, whatever the statute says, since he should be able to fire him.
6.25.2009 10:21am
Eric Rasmusen (mail) (www):
Who has standing to sue if Secretary Geither refuses to cooperate with an IG investigation? The IG? A Congressman? Congress as a whole?
6.25.2009 10:24am
mls (www):
I understand the issue of supervising the IG, but I don't see how that is relevant to attorney-client. Even if the IG is outside of Treasury, is someone arguing that attorney-client can be asserted against an independent IG (who, I assume, is appointed and removable by the President)? Does OLC contend that attorney-client can be invoked by executive branch agencies even against independent agencies like the SEC?

Personally, I don't believe that attorney-client can properly be invoked by executive agencies against Congress iether, but I understand that you OLC-types disagree.
6.25.2009 10:25am
mls (www):
"Who has standing to sue if Secretary Geither refuses to cooperate with an IG investigation? The IG? A Congressman? Congress as a whole?"

I suspect the answer to that is either (a) the IG or (b) nobody.
6.25.2009 10:28am
rosetta's stones:

"Did you feel the same way about the torture memos? Or does that fall under the national security exception? (I agree, by the way, with your comment on this case.)"


martinned, I didn't read the full memos, ignored the media's blather, and much of the commentary here, as it was far too vitriolic and passionate to be worthwhile, imo.

That said, imo, based upon the cursory temperature reading I did do, I'd release them to Congress most definitely, and directly to the public if at all practical. And I'm speaking of unredacted copies of them, if possible. If they truly must be redacted before public distribution, we should require appropriate Congressional representation to participate in the redaction process.

I realize the Executive needs legal advice, and at some levels that advice has to remain confidential, but when the advice becomes foundational to controversial action, we need some sunlight. Either the Executive has to speak up on the issues, to provide clarity and inform the People, and to remove the lawyers from the equation, or the lawyers will be left within the equation, which will be solved eventually.

AIG and TARP and Geithner don't even come close to the above case, imo. They should all be receiving an IG colonoscopy right now.
6.25.2009 11:11am
Tim (mail):
A stupid non-legal comment. If the law is unclear on this subject, should it be made unconstitutional? And a followup on an earlier question, Who could contest it?
6.25.2009 12:35pm

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