SIGTARP 11-004 September 28, 2011 

Legal Fees Paid Under the 

Troubled Asset Relief Program: 

An Expanded Report 
Office of the special inspector general 

For the Troubled Asset Relief Program 

1801 L Street, NW, 4th floor 

Washington, D.C. 20220 

SIGTARP 11-004 September 28, 2011

September 28, 2011 

MEMORANDUM FOR: Mr. Timothy Massad – Assistant Secretary for Financial 

Stability, Department of the Treasury 

FROM: Ms. Christy L. Romero – Acting Special Inspector General 

 for the Troubled Asset Relief Program 

SUBJECT: Legal Fees Paid Under the Troubled Asset Relief Program: 

An Expanded Report (SIGTARP 11-004) 

We are providing this audit report for your information and use. It is our expanded report 

on legal fees paid under the Troubled Asset Relief Program, which was created by the 

Emergency Economic Stabilization Act of 2008. The Office of the Special Inspector 

General for the Troubled Asset Relief Program conducted this audit under the authority 

of Public Law 110-343, as amended, which also incorporates the duties and 

responsibilities of inspectors general under the Inspector General Act of 1978, as 

amended. 

We considered comments from the Department of the Treasury when preparing the final 

report. The comments are addressed in the report, where applicable, and a copy of 

Treasury’s response to the audit is included in Appendix K – Management Comments, of 

this report. Names of individuals and proprietary contractor pricing information have 

been redacted in this final report. 

We appreciate the courtesies extended to our staff. For additional information on this 

report, please contact Mr. Kurt Hyde, Deputy Special Inspector General for Audit and 

Evaluation (Kurt.Hyde@treasury.gov / 202-622-4633), or Ms. Kimberley A. Caprio, 

Assistant Deputy Special Inspector General for Audit and Evaluation 

(Kimberley.Caprio@treasury.gov / 202-927-8978). 
Legal Fees Paid Under the Troubled Asset 

Relief Program: An Expanded Report 

 

SIGTARP 11-004 September 28, 2011 

Table of Contents 

Introduction ................................................................................................................................................. 1

The OFS Contracts with the Four Law Firms Did Not Include Sufficiently Detailed Billing 

Requirements or Instructions .................................................................................................................. 5

OFS Did Not Have Sufficiently Detailed Procedures for Reviewing Legal Fee Bills ............................... 6

SIGTARP’s Criteria for Reviewing Fee Bills Paid by OFS Were Based on the FAR and Best 

Practices of Other Federal Entities ......................................................................................................... 7

For the Four Law Firms, SIGTARP Found Block Billing, Either No Descriptions of Work or 

Vague Descriptions of Work, and Administrative Charges – All of Which OFS Should Have 

Questioned Before Payment ................................................................................................................... 9

The OFS Process for Awarding Legal Service Contracts Provided Adequate Price Competition ........... 21

Update on SIGTARP’s Recommendations Made in the Venable Report ................................................ 24

Conclusions and Recommendations ......................................................................................................... 25

Management Comments and SIGTARP’s Response ................................................................................ 28

Appendix A – Scope and Methodology .................................................................................................... 29

Appendix B – Potential Billing Issues ...................................................................................................... 32

Appendix C – Questioned Legal Fees by Category .................................................................................. 33

Appendix D – Contracting Services Provided to OFS by Other Treasury Offices and 

Responsibilities of Contracting Officers and Contracting Officer’s Technical Representatives ......... 34

Appendix E – OFS Legal Service Contracts ............................................................................................. 37

Appendix F – OFS Proposal Evaluation Rating Scale and Definition of Rating Terms ......................... 39

Appendix G – Payment-Related FAR Clauses Incorporated into OFS Contracts .................................... 40

Appendix H – New OFS Guidance to Its Outside Counsel on Legal Fee Bill Submission and 

Format .................................................................................................................................................. 41

Appendix I – Acronyms and Abbreviations ............................................................................................. 42

Appendix J – Audit Team Members ......................................................................................................... 43

Appendix K – Management Comments .................................................................................................... 44

This report has cleared SIGTARP’s Office of General Counsel disclosure review process and information 

determined to be restricted from public release has been redacted from this report. 

Redaction Legend: (b)(4) – 5 U.S.C.§ 552(b)(4), Trade Secrets, Commercial or Financial Information. 

(b)(6) – 5 U.S.C.§ 552(b)(6), Personal Information Affecting an Individual’s Privacy.
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SIGTARP 11-004 September 28, 2011

Introduction 

The Department of the Treasury (“Treasury”) has paid law firms millions of 

dollars for professional services related to the Troubled Asset Relief Program 

(“TARP”). The Office of the Special Inspector General for the Troubled Asset 

Relief Program (“SIGTARP”) audited Treasury’s processes for contracting for 

and payment to five of these law firms. From the inception of TARP to 

March 31, 2011, Treasury’s Office of Financial Stability (“OFS”), which 

administers TARP, paid these five law firms more than $27 million in fees and 

expenses. SIGTARP began an audit of OFS policies and practices governing 

OFS contracts with the five law firms in May 2010 as part of SIGTARP’s 

continuing oversight of TARP and in response to a request from Senator Tom 

Coburn, M.D. (SIGTARP Engagement Code 021.) Senator Coburn was 

interested in how OFS awarded contracts for professional services, whether firms’ 

labor rates were consistent with industry norms, and whether taxpayers were 

getting the best value for these services. SIGTARP’s reporting objectives were to 

determine whether OFS contracting processes for legal services ensure: 

 contractors submit invoices (“fee bills”) that accurately reflect the work 

performed; and 

 contractors charge fair and reasonable prices. 

As SIGTARP conducted its audit, it found weaknesses in the OFS contract for 

legal services with Venable, LLP (“Venable”), as well as the OFS procedures for 

review of Venable’s fee bills. Venable’s fee bills to OFS happened to be the first 

law firm’s bills audited by SIGTARP. SIGTARP’s initial review of other law 

firms’ contracts and fee bills at the time the Venable report was issued suggested 

that they too raised similar weaknesses and issues. In light of the magnitude of 

legal fees that continue to be paid by OFS under TARP, SIGTARP decided to 

issue a report based on its findings on Venable’s bills and made four 

recommendations designed to provide OFS an opportunity to quickly strengthen 

its policies, controls, and contracts to better protect taxpayers. OFS agreed to 

implement SIGTARP’s recommendations. That report – “Treasury’s Process for 

Contracting for Professional Services under TARP,” SIGTARP 11-003 (the 

“Venable report”) – was issued April 14, 2011, and is available at 

www.SIGTARP.gov. 

This report presents the results of SIGTARP’s audit of the remaining four law 

firms’ contracts and fee bills. The four firms are:  

 Simpson Thacher & Bartlett LLP (“Simpson Thacher”); 

 Cadwalader Wickersham & Taft LLP (“Cadwalader”); 

 Locke Lord Bissell & Liddell LLP (“Locke”); and 
LEGAL FEES PAID UNDER THE TROUBLED ASSET RELIEF PROGRAM: AN EXPANDED REPORT 2

 

SIGTARP 11-004 September 28, 2011

 Bingham McCutchen LLP (“Bingham”), formerly McKee Nelson LLP.1

 

As of March 31, 2011, OFS had paid these four law firms more than $25.5 million 

in legal fees and expenses that were subject to SIGTARP’s audit. SIGTARP 

conducted this audit between May 2010 and May 2011, and in accordance with 

generally accepted government auditing standards prescribed by the Comptroller 

General of the United States. For a discussion of the audit’s scope and 

methodology, see Appendix A. 

SIGTARP found weaknesses in the OFS contracts with the four firms for legal 

services and OFS policies for reviewing and paying legal fee bills. The findings 

were similar to SIGTARP’s previous report. SIGTARP found that the four firms 

submitted, and OFS paid, bills that contained one or more of the following: 

 no descriptions of the work performed; 

 vague descriptions of the work performed; 

 descriptions of more than one task in the time entry (“block billing”); 

 expense charges without adequate support; and 

 administrative charges not allowed under the contract. 

Because of the lack of adequate detail in the fee bills and lack of support for 

expenses, in many instances, OFS would not have been able to assess adequately 

the reasonableness of individual hourly charges and expenses. 

SIGTARP likewise was not able to assess the reasonableness of most of the law 

firms’ fees. SIGTARP questioned $8.1 million of the $9.1 million (89%) of legal 

fee bills reviewed. The most striking example of fees questioned by SIGTARP is 

from the law firm Simpson Thacher. Simpson Thacher billed OFS $5.8 million in 

fees and expenses with bills that provided no detail whatsoever as to the work 

performed. Further, Simpson Thacher did not provide any receipts, or adequate 

documentation, for its expenses as required in one of its contracts, and billed for 

expenses under another contract that did not allow expenses. SIGTARP 

questioned all $5.8 million in fees and expenses OFS paid to Simpson Thacher. 

Without knowing what specific work was included in the charges, OFS could not 

have determined whether the fees and expenses the firm was paid were properly 

allocable to the contract, allowable pursuant to financial regulations, and 

reasonable, which are the requirements of the Federal Acquisition Regulation 

(“FAR”). 

Although SIGTARP questioned fee bills from all of the law firms audited, this 

does not mean that all the fees and expenses SIGTARP questioned were 

unreasonable. Instead, it means that the information provided in the bills was 

 

 1 McKee Nelson LLP merged with Bingham McCutchen LLP in August 2009. The new firm uses the Bingham 

McCutchen name. In November 2009, OFS accepted the contractor’s request to novate the contract (substitute a new 

contract for the old one) and recognized Bingham McCutchen as the successor. All terms and conditions of the 

contract remained the same.
LEGAL FEES PAID UNDER THE TROUBLED ASSET RELIEF PROGRAM: AN EXPANDED REPORT 3

 

SIGTARP 11-004 September 28, 2011

insufficient to allow SIGTARP – or OFS – to fairly assess their reasonableness. 

Overall, OFS should determine the allowability of $7,980,215 in unsupported 

legal fees and expenses paid to the law firms, and disallow and seek recovery 

from Simpson Thacher for $91,482 in ineligible fees and expenses paid that were 

specifically not allowed under the OFS contract. Further, Simpson Thacher billed 

for staff in unapproved “counsel” and “senior counsel” labor categories not 

included in its contract or task orders, and OFS was not consistent in its payment 

for those labor categories – sometimes reimbursing the charges at partner rates 

and other times at associate rates. Overall, while this may have reduced OFS’ 

legal fees, the substitution of labor categories and rates after contract award was 

not documented in contract modifications. 

In the Venable report, SIGTARP concluded that OFS contracts and fee bill review 

practices created an unacceptable risk that Treasury, and therefore the American 

taxpayer, was overpaying for legal services. Therefore, SIGTARP made four 

recommendations. OFS agreed to implement SIGTARP’s recommendations and 

adopted new guidance for law firms on preparation of fee bills. OFS told 

SIGTARP that it sent that guidance to all of the law firms with which it currently 

has contracts and provided additional training to OFS staff. SIGTARP will 

continue to monitor OFS’ progress in implementing SIGTARP’s 

recommendations. 

In determining whether the prices the law firms charged OFS were fair and 

reasonable, SIGTARP first reviewed the OFS contract award process and found 

that the process was adequate and in compliance with applicable provisions of the 

FAR, which governs Federal executive agencies’ acquisition of supplies and 

services. OFS awarded all contracts with the five firms that SIGTARP reviewed, 

including Venable, under a provision in the FAR that allows the use of other than 

full and open competition due to an unusual and compelling urgency, and 

SIGTARP found that OFS followed multiple established procedures in 

accordance with the FAR. Although OFS had narrowed the competitive field by 

selecting firms that would receive a request to submit an offer to the Government 

(rather than soliciting offers from all interested sources as would be required 

under a full and open competition), OFS solicited, received, and evaluated 

multiple offers before awarding these contracts. Further, even though OFS also 

limited offeror response times and OFS evaluation times so contracts could be 

awarded quickly, SIGTARP concluded that the OFS process provided adequate 

price competition. 

However, notwithstanding the professional service prices in the contract, 

SIGTARP found that OFS paid Simpson Thacher the full amount Simpson 

Thacher billed for its foreign subcontractor, even though the charges were at rates 

significantly above the ceiling rate in the contract. OFS paid more than $520 per 

hour above the maximum allowable partner rate, $220 above the maximum 

allowable associate rate, and $152 more than the maximum legal assistant rate. 

Notwithstanding the fact that there was no need for OFS to pay more for these 
LEGAL FEES PAID UNDER THE TROUBLED ASSET RELIEF PROGRAM: AN EXPANDED REPORT 4

 

SIGTARP 11-004 September 28, 2011

services since Simpson Thacher had already agreed in its contract to provide these 

services at a lower rate, SIGTARP found no documentation to justify OFS paying 

the higher rates. In total, OFS overpaid Simpson Thacher $68,936 for the work of 

this subcontractor, and OFS should seek reimbursement of the amount paid in 

excess of the maximum rates provided for in the contract. SIGTARP considers 

these costs ineligible for reimbursement under OFS contract provisions. 

In this report, SIGTARP is making new recommendations for OFS to determine 

the allowability of unsupported legal fees and expenses and recover ineligible 

legal fees and expenses paid to the four law firms, as well as all other law firms. 

To further improve controls over the review and payment of legal fee bills, OFS 

should also require pre-approval of all contracted legal staff and pre-justification 

of their billing rates. SIGTARP’s specific recommendations are discussed later in 

this report. 

 
LEGAL FEES PAID UNDER THE TROUBLED ASSET RELIEF PROGRAM: AN EXPANDED REPORT 5

 

SIGTARP 11-004 September 28, 2011

The OFS Contracts with the Four Law Firms 

Did Not Include Sufficiently Detailed Billing 

Requirements or Instructions 

Similar to what SIGTARP found in the Venable contract, SIGTARP found that 

the contracts with these four law firms did not contain detailed billing 

requirements, instructions regarding the preparation of fee bills, or specific 

guidance on allowable costs and services. Instead, the contracts incorporated only 

general payment information by reference to two FAR provisions governing 

payment. SIGTARP also examined the task orders issued under the contracts, but 

none included any additional invoice or billing requirements. The task orders did 

include instructions on how to email fee bills to Treasury’s vendor pay system for 

payment, but did not provide instructions on how the fee bills should be structured 

or how attorneys and paralegals should document and report their time for each 

activity. 

OFS contracts with the law firms ultimately govern allowable services and costs. 

As SIGTARP reported previously, if OFS had included specific, detailed 

provisions regarding billing methods, and allowable services and costs in its 

contracts, or had more effective internal procedures for reviewing legal fee bills, 

the billing issues SIGTARP identified should not have been allowed. 
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SIGTARP 11-004 September 28, 2011

OFS Did Not Have Sufficiently Detailed 

Procedures for Reviewing Legal Fee Bills

SIGTARP found weaknesses in OFS’ then-existing procedures for reviewing 

invoices from contractors because the procedures lacked sufficient detail. As 

previously discussed in more detail in SIGTARP’s Venable report, SIGTARP 

reviewed the OFS “Contracting Officer Technical Representative (COTR) 

Nomination and File Organization Procedures” (“COTR procedures”) and the 

OFS “Administration Procedures” to determine whether these procedures are 

sufficient to ensure payments are made only for invoices submitted by contractors 

that adequately and accurately reflect the work performed and that only include 

allowable costs. The COTR procedures state, in Section 4.3.1.2, Contract 

Performance Management, that COTR duties may include, “Reviewing contractor 

invoices to ensure costs are allocable to the contract, allowable pursuant to 

financial regulations, and reasonable.” However, the procedures do not provide 

specifics on allowable and unallowable costs, services, and charges; nor are 

COTRs separately provided this information as a guide to perform reviews of the 

fee bills. The OFS procedures do not provide specific instructions or guidelines 

that would serve as a basis for COTRs to review and question invoices. 

As reported previously, OFS COTRs interviewed by SIGTARP confirmed that 

there were no written standards for the invoice review process. The OFS COTRs 

told SIGTARP that they employ informal processes that begin when the 

contractor submits an invoice and status report that includes hours and dollars 

spent. The COTRs stated that they review all documentation for accuracy and 

reasonableness and typically communicate with the various OFS business teams 

and others receiving a contractor’s work to determine whether the time and 

information reported are accurate. They also review invoices submitted by other 

vendors for similar tasks and compare them to the invoice they are examining. 

The COTRs informed SIGTARP that when conducting their reviews of legal 

contracts in particular, they look for issues such as unauthorized attorneys 

working on the contract, double billing, or “other direct costs”2 not covered by the 

contract such as automated legal research, long-distance telephone calls, and 

commercial messenger and delivery services. According to the COTRs, unless 

the contract states that other direct costs are reimbursable, they are not paid. The 

COTRs told SIGTARP they employed all of these informal processes when 

reviewing the fee bills that were the subject of this audit. 

 

 2 “Other direct costs” are contract-related expenses for anything other than direct labor charges. 
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SIGTARP 11-004 September 28, 2011

SIGTARP’s Criteria for Reviewing Fee Bills Paid 

by OFS Were Based on the FAR and Best 

Practices of Other Federal Entities

Without the benefit of detailed guidance to law firms in the OFS contracts or 

detailed OFS internal procedures for its staff to review the bills, SIGTARP looked 

to the following guidance (which is more extensively explained in SIGTARP’s 

Venable report): 

 FAR clauses expressly incorporated in the OFS legal service contracts; and 

 general provisions in the FAR governing labor-hour contracts. 

In addition, SIGTARP looked to best practices of other Federal entities, 

particularly the Federal Deposit Insurance Corporation (“FDIC”), which has a 

long history of contracting with law firms to provide legal representation and 

advice to the agency to assist it in the management and liquidation of assets and 

liabilities from closed, insured banks.3

 The FDIC Outside Counsel Deskbook 

directs, among other things, the billing practices of law firms working with FDIC.

It includes: 

 

 requirements for outside counsel to prepare a budget at the commencement of 

a matter and submit detailed fee bills on a regular basis in accordance with the 

budget; 

 submission instructions, including requirements for monthly billing and for 

billing within 30 days of the last day of the contractor’s billing cycle; 

 descriptions and lists of billable and non-billable fees and expenses, including 

documented approval and retention of receipts for non-overhead expenses; 

and 

 invoice format, including requirements and examples for: 

o detail and description of services or activities (time billed for each activity 

should be identified separately; block billing – the combination of 

different types of activities in one entry on the invoice – is prohibited, 

even if the same individual performed the activities, unless the total time 

charged is no more than 30 minutes); 

o time increments (billing in increments of greater than 0.1 hour – 6 minutes 

– is unacceptable); 

o itemization of expenses; and 

 

 3 Outside counsel under contract to FDIC provide a broad range of services, including liquidation of failed insured 

depository institutions; bankruptcy and creditors’ rights; collections; foreclosures; real estate and financial transactions 

including debt restructuring; general business and corporate law advice; professional, director, and officer liability issues; 

and other litigation. As of July 31, 2010, FDIC’s website (www.FDIC.gov) listed more than 900 law firms on its “List of 

Counsel Available.”
LEGAL FEES PAID UNDER THE TROUBLED ASSET RELIEF PROGRAM: AN EXPANDED REPORT 8

 

SIGTARP 11-004 September 28, 2011

o travel reimbursements, similar to requirements in Government travel 

regulations. 

SIGTARP also reviewed practices used by the Department of Justice’s United 

States Trustee Guidelines,4

 and local rules of court established by the Delaware 

Bankruptcy Court.5

Using the FAR and best practices of these Federal entities, SIGTARP prepared a 

list of potential billing issues and then evaluated a sample of legal fee bills paid 

by OFS by comparing each individual hourly labor charge in the fee bills to the 

list of potential billing issues.6 All potential billing issues SIGTARP assessed are 

listed in Appendix B. 

The sampled fee bills represent about $9.1 million of the total $25.5 million OFS 

paid the four law firms that were subject to SIGTARP’s audit in this report, or 

36% of total billings. The value of each of the law firms’ legal fees that 

SIGTARP audited is shown in Table 2 of Appendix A. 

 

 

 4 The Bankruptcy Reform Act of 1994 amended the responsibilities of the United States Trustees under 28 U.S.C. 

586(a)(3)(A) to provide that, whenever they deem appropriate, United States Trustees will review applications for 

compensation and reimbursement of expenses under section 330 of the Bankruptcy Code, 11 U.S.C. 101, et seq., in 

accordance with procedural guidelines adopted by the Executive Office for United States Trustees. The guidelines are 

available at http://www.justice.gov/ust/eo/rules_regulations/guidelines/docs/feeguide.htm. 5 Although SIGTARP assessed Rule 2016-2 (d) from the Local Rules for the United States Bankruptcy Court, District of 

Delaware, which became effective February 1, 2009, all bankruptcy courts have similar standards for fees, whether 

contained in local rules or not. The Delaware Bankruptcy Court is considered a leading bankruptcy court for standards 

because of the number of corporations registered in the state. The rule is available at 

http://www.deb.uscourts.gov/LocalRules/LOCAL%20RULES%202009.pdf. 6 SIGTARP selected the largest fee bills submitted by the four law firms.
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SIGTARP 11-004 September 28, 2011

For the Four Law Firms, SIGTARP Found Block 

Billing, Either No Descriptions of Work or Vague 

Descriptions of Work, and Administrative Charges 

– All of Which OFS Should Have Questioned 

Before Payment 

In an effort to assess the reasonableness of the $9.1 million sample of fee bills, 

SIGTARP compared descriptions of work performed by each contracted attorney 

or paralegal (collectively “timekeepers”) in each individual time charge on the 

sampled fee bills to the list of potential billing issues in Appendix B. SIGTARP 

questioned any item that: 

 was not a professional service and was not directly attributable to achieving 

the contract or task order statement of work, such as preparing an invoice or 

researching case law for matters outside the scope of work; 

 did not have sufficiently detailed descriptions of the task performed; or 

 had descriptions of more than one task in the time entry, which is typically 

called lump billing or block billing. 

After reviewing each charge, SIGTARP classified it as: 

 “allowable,” 7 when no exception to the FAR or SIGTARP’s list of potential 

billing issues was noted; 

 “unallowable,” when the cost was not allowed as prescribed by FAR 

31.201-2, or fit the description of a charge included in SIGTARP’s list of 

potential billing issues in Appendix B; or 

 “unsupported,” when the description of work did not contain enough 

information for SIGTARP to determine whether the task met the five FAR 

31.201-2 requirements8

 to be “allowable” or whether it fit the description of a 

charge included in SIGTARP’s list of potential billing issues. 

Where there were no descriptions of the specific work performed, SIGTARP 

questioned all of the fees. Where there were descriptions of the work, SIGTARP 

assessed the description of work performed in each individual time charge. 

 

 7 FAR Subpart 31.2, Contracts with Commercial Organizations, prescribes the determination and proper treatment of costs in 

Government contracts with commercial organizations. Specifically, subsection 31.201-1 describes the composition of total 

cost, and subsections 31.201-2 through 31.201-4, respectively, describe the principles used to determine whether costs are 

properly allowable, reasonable, and allocable to Government contracts. 8 Under FAR 31.201-2, a cost is allowable only when it complies with all of the following five requirements. The cost must: 

(1) be reasonable (not exceed that which would be incurred by a prudent person in the conduct of a competitive business), 

(2) be allocable (incurred specifically for the contract), (3) meet standards promulgated by the Cost Accounting Standards 

Board or generally accepted accounting principles, (4) be within the terms of the contract, and (5) be within any limitations 

set forth by FAR Subpart 31.2, which prescribes the determination and proper treatment of costs in Government contracts 

with commercial organizations. 
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SIGTARP 11-004 September 28, 2011

SIGTARP questioned $8.1 million, or 89%, of the fee bills reviewed. Including 

the amounts questioned for Venable in SIGTARP’s previous report, SIGTARP 

questioned $8.7 million of $10.1 million in legal fees audited, or 86%. Table 1 

identifies the costs SIGTARP questioned for each sampled law firm. The fact that 

SIGTARP questioned these costs does not mean that all of the money paid should 

be recovered from the law firms. Instead, it means that OFS should request and 

receive additional information from the law firms to justify payment under the 

FAR as being properly allocable to the contract, allowable, and reasonable, and in 

accordance with the best practices of other Federal entities. 

TABLE 1 

QUESTIONED LEGAL FEES 

Law Firm 

Audited 

Fees and 

Expenses 

Questioned 

Fees and 

Expenses 

Percent of 

Audited Fees 

Questioned 

Simpson Thacher & Bartlett LLP 1 $5,883,206 $5,883,206 100% 

Cadwalader Wickersham & Taft LLP 2 2,869,998 1,983,685 69% 

Locke Lord Bissell & Liddell LLP 272,243 146,867 54% 

Bingham McCutchen LLP 

(novated from McKee Nelson LLP) 67,383 57,939 86% 

Subtotal Related to This Report $9,092,830 $8,071,697 89% 

Venable LLP 3 1,027,049 676,840 66% 

Total for This Audit $10,119,879 $8,748,537 86% 

Notes: Numbers affected by rounding. 

1 Simpson Thacher’s contract number TOFS-09-0009 is still active. Between 02/04/2011, when OFS provided SIGTARP fee 

bills for audit, and 03/31/2011, OFS paid additional Simpson Thacher fee bills totaling $83,824. The additional fee bills were

not subject to SIGTARP’s audit. 

2 OFS awarded contract number TOFS-10-D-0006 to Cadwalader Wickersham & Taft after SIGTARP’s audit began. It was, 

therefore, not subject to audit. As of 03/31/2011, $3,789,815 had been obligated and $992,237 was expended under the 

contract. 

3 All amounts shown for Venable LLP were previously reported in audit report number SIGTARP 11-003, “Treasury’s Process 

for Contracting for Professional Services under TARP,” issued April 14, 2011, and are shown here for comparative purposes 

only. 

Source: SIGTARP analysis of data provided by OFS. 

SIGTARP questioned the largest percentage of costs because law firms provided 

inadequate detail to support charges for hourly fees and related expenses.9

 Then, 

SIGTARP questioned most of the remaining costs because they were block billed, 

meaning that a single charge included descriptions of several different tasks 

without specifying the time required to complete each task, and together the tasks 

totaled more than 30 minutes.10 While OFS’ legal service contracts did not 

specifically prohibit block billing, the COTRs had the authority to reject invoices 

containing such billing based on FAR standards. Reasonableness of individual 

 

 9 Appendix C presents all questioned and unsupported legal fees and expenses that SIGTARP identified, categorized by 

type of billing issue. 10 Consistent with the FDIC Outside Counsel Deskbook, SIGTARP did not question block-billed charges totaling 30 minutes 

or less. 
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SIGTARP 11-004 September 28, 2011

tasks, and, therefore, allowability under the FAR guidelines, cannot be determined 

when charges are block billed. That OFS COTRs did not use this authority under 

the FAR guidelines may have been a product of the lack of sufficiently detailed 

OFS procedures on reviewing fee bills. SIGTARP, however, questioned all 

block-billed charges. SIGTARP questioned fee bills from all four firms audited, 

as discussed in the sections below. 

SIGTARP Questioned All $5.8 Million of Simpson Thacher’s Legal 

Fees Because Simpson Thacher Did Not Provide Any Description of 

Work Performed or Any Receipts for Expenses 

From the inception of TARP in October 2008, through March 31, 2011, OFS paid 

Simpson Thacher more than $5.8 million in legal fees and expenses under three 

contracts. The first, contract TOS-09-007, was awarded on October 10, 2008. 

While containing a Statement of Work broad enough to include legal advice and 

services on any of the TARP programs, it focused on the Public-Private 

Investment Program (“PPIP”). Simpson Thacher also provided corporate law 

advice for such matters as disposing of the warrants issued under the Capital 

Purchase Program (“CPP”), and the sale of shares of Citigroup common stock 

received as part of CPP. The contract had a maximum value of $500,000, which 

OFS increased to $1,025,000 through a series of modifications.11 In total, 

Simpson Thacher was paid $931,090 for its services under this contract. The 

second contract, TOFS-09-D-0001, was awarded to Simpson Thacher on 

February 20, 2009, to provide legal services related to Treasury investments under 

CPP and the Capital Assistance Program (“CAP”). This contract had a maximum 

value of $5,000,000.12 In total, Simpson Thacher was paid $1,530,023 for its 

services under this contract. The third contract, TOFS-09-D-0009, was awarded 

on May 26, 2009, and contained the same Statement of Work as Simpson 

Thacher’s first OFS contract. This contract had a maximum value of 

$15,000,000, and is still active.13 As of March 31, 2011, Simpson Thacher had 

received $3,505,917 for its services under this contract. 

SIGTARP questioned all $5.8 million in fees and expenses OFS paid to Simpson 

Thacher because Simpson Thacher provided no detail of work performed in its fee 

bills, and did not provide receipts or proper documentation for expenses. Because 

no descriptions of individual tasks performed were included in any of the 43 fee 

bills submitted under the 11 task orders of the three contracts, SIGTARP could 

not determine whether, as required by the FAR, any fees or costs submitted by 

Simpson Thacher and paid by OFS were allocable to the contract, allowable 

pursuant to financial regulations, and reasonable. OFS COTRs should not have 

paid any of Simpson Thacher’s fee bills without additional information. 

 

11 On October 10, 2008, OFS awarded the only task order for this contract for work performed through April 9, 2009. 12 Between February 20, 2009, and July 10, 2009, six task orders were awarded under the Simpson Thacher contract for work 

performed through October 31, 2009. 13 Four task orders have been issued under this contract. 
LEGAL FEES PAID UNDER THE TROUBLED ASSET RELIEF PROGRAM: AN EXPANDED REPORT 12

 

SIGTARP 11-004 September 28, 2011

OFS COTRs did initially reject some invoices and reduced payments on others, 

then later approved them for payment after receiving corrected fee bills. Based on 

emails and documentation in the contract file, COTRs rejected invoices or 

questioned charges for reasons such as: 

 billing for other direct costs under a contract that did not allow for them; 

 billing for unapproved labor categories; 

 billing at rates above the contract’s maximum allowable labor rates; 

 billing amounts above the task order maximum ceiling value; 

 billing for work performed under an incorrect task order; and 

 submitting vendor backup documentation that did not match source materials. 

However, despite raising these issues, OFS still paid more than $5.8 million in 

fees and expenses for fee bills that contained no description of work whatsoever. 

It is unclear, however, why the COTRs allowed Simpson Thacher to continue to 

bill in the manner it did. 

The following is an example of a typical Simpson Thacher fee bill provided to 

SIGTARP by OFS:
LEGAL FEES PAID UNDER THE TROUBLED ASSET RELIEF PROGRAM: AN EXPANDED REPORT 13

 

SIGTARP 11-004 September 28, 2011

Invoice No. 257565

U.S. DEPARTMENT OF THE TREASURY October 14, 2009 

SIMPSON THACHER & BARTLETT LLP 

425 LEXINGTON AVENUE, NEW YORK, NEW YORK 10017-3954 

For all professional services rendered in 

connection with Treasury/TO Obligation 

Document No. TOFS-09-D-0001 TO 0005 

through June 26, 2009, based on time 

recorded through October 1, 2009. 

 Hours and Dollars Spent * 

 Hours Dollars

Partners

[name redacted–(b)(6)] [hours redacted–(b)(4)] $756.88 

[name redacted–(b)(6)] [hours redacted–(b)(4)] $41,175.00 

[name redacted–(b)(6)] [hours redacted–(b)(4)] $24,745.00 

[name redacted–(b)(6)] [hours redacted–(b)(4)] $2,850.00

[name redacted–(b)(6)] [hours redacted–(b)(4)] $14,488.75 

Senior Counsel

[name redacted–(b)(6)] [hours redacted–(b)(4)] $3,155.63 

Associates

[name redacted–(b)(6)] [hours redacted–(b)(4)] $5,573.75 

[name redacted–(b)(6)] [hours redacted–(b)(4)] $914.38 

[name redacted–(b)(6)] [hours redacted–(b)(4)] $16,032.50 

[name redacted–(b)(6)] [hours redacted–(b)(4)] $16,948.75 

[name redacted–(b)(6)] [hours redacted–(b)(4)] $29,375.00 

[name redacted–(b)(6)] [hours redacted–(b)(4)] $481.25 

[name redacted–(b)(6)] [hours redacted–(b)(4)] $1,856.25 

[name redacted–(b)(6)] [hours redacted–(b)(4)] $4,143.75 

[name redacted–(b)(6)] [hours redacted–(b)(4)] $19,617.50 

[name redacted–(b)(6)] [hours redacted–(b)(4)] $18,335.63 

[name redacted–(b)(6)] [hours redacted–(b)(4)] $700.63 

Legal Assistants

[name redacted–(b)(6)] [hours redacted–(b)(4)] $50.00 

[name redacted–(b)(6)] [hours redacted–(b)(4)] $350.00 

[name redacted–(b)(6)] [hours redacted–(b)(4)] $281.25 

[name redacted–(b)(6)] [hours redacted–(b)(4)] $58.75 

[name redacted–(b)(6)] [hours redacted–(b)(4)] $56.25 

   

Total [hours redacted–(b)(4)] $201,946.88 

* Hours reflect entries recorded in the Firm’s computer system as 

of October 1, 2009 and may not reflect all hours for services 

rendered during the period. 

Narrative task descriptions were not included in any of the Simpson Thacher 

invoices. In fact, two of Simpson Thacher’s early fee bills paid by OFS contained 

only the total dollar amount owed for professional services rendered. Both were 

submitted on the same day – one was for $200,000 and the other, for $300,000. 

Neither contained any detail of work performed, the number of hours worked, 

labor rates, names of attorneys and paralegals performing the work, or even the 

billing period. At SIGTARP’s request during the course of this audit, OFS 

In This Invoice, 

SIGTARP Was 

Looking For: 

 Task Descriptions and 

Completion Times – 

Detailed descriptions of each 

service or activity, and the 

time billed for each. 

o Without task descriptions, 

the reviewer cannot tell 

whether the work was 

necessary or related to this 

contract. 

o Without completion times, 

the reviewer cannot tell 

whether the time billed to do 

the work was reasonable. 

o Each task description and the 

time charged to complete 

that task should be presented 

separately – tasks should not 

be combined, and times 

should not be combined. 

 Hourly Rate – If the hourly 

rate for each timekeeper is 

not shown, the reviewer must 

recalculate each line to 

determine whether the rate is 

correct. 

 Receipts for Expenses – 

Although expenses were not 

included in this bill, when 

other direct costs are billed, 

receipts need to be provided 

so the reviewer can see that 

the expenses were necessary 

and properly related to the 

contract. 
LEGAL FEES PAID UNDER THE TROUBLED ASSET RELIEF PROGRAM: AN EXPANDED REPORT 14

 

SIGTARP 11-004 September 28, 2011

obtained from Simpson Thacher hourly breakdown information for these two 

invoices, but descriptions of specific tasks performed were not provided. 

Other fee bills included only the total number of hours charged, while still others 

contained only the total number of hours broken out by timekeeper (as shown in 

the previous example) without any detail as to the tasks the timekeeper was 

performing. No invoice contained enough information to justify OFS paying 

Simpson Thacher. 

Other billing issues identified by SIGTARP in the review of Simpson Thacher fee 

bills include the following: 

 Simpson Thacher billed for foreign subcontractor costs (for a United 

Kingdom firm) without obtaining prior consent from Treasury for 

subcontracting, and billed at rates significantly above the contract’s 

maximum allowable rate for each labor category – Simpson Thacher used 

a subcontractor in the United Kingdom for legal services under its contract 

(TOFS-09-0001, task order 1). This task order was subject to the terms of the 

original contract, which incorporates FAR 52.244-2, Subcontracts, and, 

among other things, requires pre-approval of any labor-hour subcontracts. In 

other words, Simpson Thacher was not authorized to enter into a subcontract 

with any firm because Simpson Thacher did not obtain prior consent from the 

contracting officer to do so. Nonetheless, significantly after the fact, the 

contracting officer approved Simpson Thacher’s use of the subcontractor. 

OFS also reimbursed Simpson Thacher for this subcontractor at rates 

significantly above the ceiling rate in Simpson Thacher’s contract. Simpson 

billed more than $520 per hour above the maximum allowable partner rate, 

$220 above the maximum allowable associate rate, and $152 more than the 

maximum legal assistant rate. SIGTARP found no justification in the contract 

file for OFS paying the higher rates. Simpson Thacher had already agreed in 

its contract to provide these services at a lower rate. In total, OFS overpaid 

Simpson Thacher $68,936 for the work of this subcontractor, and OFS should 

seek reimbursement of the amount paid in excess of the maximum rates 

provided for in the contract. SIGTARP considers these costs ineligible under 

OFS contract provisions. 

 Simpson Thacher billed for unauthorized expenses and did not provide 

receipts for authorized expenses – Although reimbursed by OFS, “other 

direct costs,” which are contract-related expenses for anything other than 

direct labor charges, were not allowed unless specifically authorized. 

However, OFS reimbursed other direct costs for Simpson Thacher, even when 

those expenses were not authorized under Simpson Thacher’s contract and 

task order. According to the OFS COTRs whom SIGTARP interviewed, and 

confirmed later by OFS, in order for other direct costs to be properly 

reimbursed an “Other Direct Costs” clause must be included in the contract, or 
LEGAL FEES PAID UNDER THE TROUBLED ASSET RELIEF PROGRAM: AN EXPANDED REPORT 15

 

SIGTARP 11-004 September 28, 2011

an express allowance for other direct costs must be included in the specific 

task order. Neither Simpson Thacher’s contract TOS-09-007 nor its 

underlying task order included an Other Direct Costs clause. Nonetheless, 

$22,546 in other direct costs were submitted by Simpson Thacher and 

reimbursed by OFS. SIGTARP questioned all $22,546 in other direct costs 

billed under this contract because the other direct costs provision was not 

included in the contract and those expenses should not have been reimbursed 

under OFS’ current practices. Accordingly, SIGTARP considers these costs 

ineligible for reimbursement under OFS contract provisions. 

In another Simpson Thacher contract, other direct costs were authorized. 

However, Simpson Thacher did not provide receipts or adequate 

documentation for those other direct costs that Simpson Thacher was allowed 

to bill to OFS. Specifically, in contract TOFS-09-D-0009, other direct costs 

were allowed, and Simpson Thacher was reimbursed for such costs totaling 

$5,286. As stated in the contract: “All invoices shall be fully documented by 

including receipts evidencing payment by the contractor and shall identify the 

action with which the expenditure is connected.” However, except for one 

instance when information regarding a telephone call was provided, receipts, 

or adequate documentation, were not provided for other direct costs as part of 

the invoice. In the one instance when more information was provided to 

document telephone calls, the matter being discussed was not clearly 

identified, nor were the individuals participating in the call. Other expense 

descriptions for telephone calls did not state whether they were local or longdistance, which determines whether or not they were properly reimbursable. 

After SIGTARP questioned OFS about these charges, OFS obtained 

additional receipts and documentation from Simpson Thacher and provided 

them to SIGTARP. However, OFS did not obtain receipts and documentation 

from Simpson Thacher for these charges prior to SIGTARP raising the issue 

in this audit. Also, the additional receipts and documentation did not include 

the topics researched or the subject matter discussed in telephone calls and, 

therefore, it is not possible to determine whether these charges are properly 

reimbursable. 

 Invoices did not clearly identify the beginning and ending dates of the 

billing period covered, and invoices were not submitted timely or on a 

regular basis – Combined, these two factors would have inhibited the ability 

of OFS to assess the reasonableness of the charges in any given month. For 

example, because Simpson Thacher did not have fixed cutoff and billing 

periods, it continued to collect time charges from previous billing periods and 

then billed them to OFS with current period charges. This process also 

allowed timekeepers to continue documenting their time after the end of the 

billing period during which they provided services to OFS. For example, the 

Simpson Thacher invoice above – dated October 14, 2009 – stated that it was 

“For all professional services rendered...through June 26, 2009, based on time 

recorded through October 1, 2009.” In other words, in this instance Simpson 
LEGAL FEES PAID UNDER THE TROUBLED ASSET RELIEF PROGRAM: AN EXPANDED REPORT 16

 

SIGTARP 11-004 September 28, 2011

Thacher’s staff was three months late not only in reporting their time but also 

in recording the time. As such, the COTR would not have had the opportunity 

to even review the invoice until months after the work had been performed 

and could not have reasonably determined whether the hours charged for the 

tasks were appropriate. For example, on one invoice, Simpson Thacher billed 

514 hours for one of its attorneys and 459 for another. This would be 

excessive for a month’s billing – an average of 128 hours and 114 hours per 

week, respectively – but without knowing the billing period, reasonableness 

cannot be determined. 

 Simpson Thacher billed for staff in unapproved “counsel” and “senior 

counsel” labor categories not included in its contract or task orders, and 

OFS was not consistent in its payment for those labor categories – Only 

“partner,” “associate,” and “legal assistant” labor categories were included in 

Simpson Thacher contracts TOFS-09-D-0001 and TOFS-09-D-0009. As 

such, the various “counsel” labor categories were not included in the 

“Maximum Labor Rate Table,” and OFS told SIGTARP that neither of the 

two contracts was modified to include them. 

For contract TOFS-09-D-0001, Simpson Thacher billed for attorneys in 

“counsel” and “senior counsel” labor categories at varying rates and OFS paid 

for the counsel labor categories by sometimes reimbursing the charges at 

partner rates and other times at associate rates – but there was no justification 

for any of the rates Simpson Thacher charged or the OFS reimbursement 

rates. OFS told SIGTARP that an agreement on reimbursement rates for 

counsel for this contract was based on conversations between the contracting 

officer and the COTR in early 2009, and that it was the COTR’s 

understanding that counsel rates – billed below the maximum rate for partner 

– were allowable. Under contract TOFS-09-D-0009, Simpson Thacher again 

billed, and OFS paid, for some attorneys in counsel labor categories, even 

though there was no documentation that OFS had agreed to the use of counsel 

labor categories. 

Because a rate category for counsel did not exist in either contract, there were 

no standards in the contracts that delineated the experience required for this 

labor category. Thus, a more junior attorney could have been billed at a 

partner-equivalent rate. The inconsistencies allowed by the OFS COTRs 

could have been avoided by: (a) the use of multiple rate categories within 

each labor category based on justifiable, previously agreed-upon standards 

such as the attorneys’ years of experience; and (b) OFS requiring preapproval, in specified labor categories and at specified rates, of all contracted 

legal staff before they are allowed to work on and charge time to OFS 

projects. 

 Some Simpson Thacher individual attorneys and other staff billed at 

different rates – For example, on one invoice the same attorney appears four 
LEGAL FEES PAID UNDER THE TROUBLED ASSET RELIEF PROGRAM: AN EXPANDED REPORT 17

 

SIGTARP 11-004 September 28, 2011

times and billed at two different rates. OFS told SIGTARP that it was not 

notified in advance of any changes to individual billing rates. SIGTARP 

found no evidence of contractor staff being preapproved to work on the 

contract or identification of any specific labor category or rate for contractor 

staff before fee bills were submitted. Simpson Thacher did not provide 

documentation to explain why some attorneys and staff in the same labor 

category could bill at a higher rate than others. However, OFS informed 

SIGTARP that specific contractor employee rates were not approved or 

disapproved as long as their billing rate was within the labor category range 

and the employee met the requirements of the labor category description. 

SIGTARP Questioned $1,983,685 of Cadwalader’s Legal Fees 

On March 30, 2009, OFS entered into a contract with Cadwalader to provide legal 

services related to Treasury’s TARP investment in the auto industry. The contract 

initially had an $8,590,000 maximum value that was raised to $26,756,322 

through a contract modification.14 In total, OFS paid Cadwalader $17,392,786 for 

its services under this contract. 

Of the $2,869,998 sample of Cadwalader’s legal fees and expenses SIGTARP 

reviewed, SIGTARP questioned $1,983,685 that OFS paid to Cadwalader, 

primarily based on block billing. In addition, in some instances Cadwalader did 

not provide enough detail for SIGTARP to determine whether charges were 

reasonable, and in other instances, paralegals or clerical staff could have 

performed tasks performed by attorneys. These billing issues are illustrated in the 

following examples: 

 Block billing – 

05/01/09 [Timekeeper name redacted–(b)(6)]: EMAIL EXCHANGE AMONG LAW FIRMS 

PLOTTING DOL CONF CALL RE VEBA. STUDY DEAL DOCS FOR SAME. LONG CONF 

CALL DOL RE ERISA & VEBA. TCS AND EMAILS RE SAME WITH [name redacted–

(b)(6)], [name redacted–(b)(6)], ETC. DRAFT SUMMARY OF CONF CALL FOR UST. 

(6.00 HOURS) 

05/01/09 [Timekeeper name redacted–(b)(6)]: TELEPHONE CALLS WITH [name redacted–

(b)(6)], [name redacted–(b)(6)]; CONFERENCE RE: TAX ISSUES WITH [name 

redacted–(b)(6)]; [name redacted–(b)(6)]; [name redacted–(b)(6)]; [name 

redacted–(b)(6)]; [name redacted–(b)(6)]; REVIEW AND REVISE DOCUMENTS;

RESEARCH RE: TAX ISSUES. (6.84 HOURS) 

 Inadequate detail – 

05/01/09 [Timekeeper name redacted–(b)(6)]: REVISE AGREEMENTS, SCHEDULES; CALLS;

E-MAILS. (5.00 HOURS) 

05/03/09 [Timekeeper name redacted–(b)(6)]: REVIEW SCHEDULES; E-MAILS. (2.50 HOURS) 

 

14 Between April 2, 2009, and July 8, 2009, four task orders were awarded under the contract for work performed through 

July 31, 2010.
LEGAL FEES PAID UNDER THE TROUBLED ASSET RELIEF PROGRAM: AN EXPANDED REPORT 18

 

SIGTARP 11-004 September 28, 2011

 Tasks not requiring attorneys – 

05/01/09 [Timekeeper name redacted–(b)(6)]: PREPARED SIGNING DOCUMENT ROOM. 

(13.84 HOURS) 

05/01/09 [Timekeeper name redacted–(b)(6)]: SCANNED PDFS OF TERM SHEETS,

SUBSCRIPTION AGREEMENTS, AND ADDITIONAL PURCHASE AGREEMENT AND 

LETTERS TO [name redacted–(b)(6)], [name redacted–(b)(6)] AND [name 

redacted–(b)(6)]. (1.34 HOURS) 

05/01/09 [Timekeeper name redacted–(b)(6)]: MONITOR SIGNING ROOM; UPDATE FOLDERS 

FOR SIGNING DOCUMENTS; UPDATE INDEX OF SIGNING DOCUMENTS. (6.17 HOURS) 

Because multiple tasks were included in block billed charges without actual 

completion times, SIGTARP was not able to determine which portions of these 

charges are appropriate and so questioned the entire amount. Cadwalader would 

need to provide additional information for OFS to determine whether these 

charges were reasonable and therefore allowable. 

Further, in reviewing the descriptions in Cadwalader’s fee bills, there was 

inadequate detail to determine whether the charge was reasonable. In the example 

above, the COTR could not have reasonably determined with whom the 

conference calls and conferences were held and for what purpose, and whether the 

conferences and calls were necessary for the level of persons involved, and not 

longer than necessary. 

SIGTARP Questioned $146,867 of Locke’s Legal Fees 

On February 12, 2009, OFS entered into a contract with Locke to provide legal 

services in support of certain of Treasury’s TARP investments in S-Corporations 

as well as other certain investments in TARP’s Capital Purchase Program.15 The 

contract had a $2,000,000 maximum value. In total, the firm was paid $272,243 

for its services under this contract.

16

Of the $272,243 of Locke’s legal fees and expenses OFS paid, SIGTARP 

questioned approximately half ($146,867). Most of the charges were questioned 

because they were block billed. In some cases, Locke’s descriptions of tasks 

performed did not contain enough detail for SIGTARP to determine whether 

charges were reasonable. These billing issues are illustrated in the following 

examples: 

 

15 Under the Capital Purchase Program, Treasury directly purchased preferred stock or subordinated debentures in qualifying 

financial institutions. CPP was intended to provide funds to “stabilize and strengthen the U.S. financial system by 

increasing the capital base of an array of healthy, viable institutions, enabling them [to] lend to consumers and 

business[es].” Treasury invested $204.9 billion in 707 institutions through CPP. 16 On February 12, 2009, OFS awarded the only task order under the contract and work was performed through May 5, 2009.
LEGAL FEES PAID UNDER THE TROUBLED ASSET RELIEF PROGRAM: AN EXPANDED REPORT 19

 

SIGTARP 11-004 September 28, 2011

 Block billing – 

03/09/09 [Timekeeper name redacted–(b)(6)]: CONFERENCE WITH [name redacted–(b)(6)]

AND [name redacted–(b)(6)]; REVIEW DOCUMENTS. (4.00 HOURS) 

03/10/09 [Timekeeper name redacted–(b)(6)]: CIRCULATION OF CORRESPONDENCE TO 

TREASURY AND [bank name redacted–(b)(4)] WITH APPLICABLE DOCUMENTS;

REVIEWS OF RECEIVABLES AND INTERNAL DISCUSSION WITH REGARD THERETO;

PREPARATION OF FURTHER REQUIRED CORRESPONDENCE; REVIEW OF PACKAGE OF 

SIGNATURE PAGES; CALL WITH COUNSEL TO [bank name redacted–(b)(4). (6.70

HOURS) 

 Inadequate detail – 

03/11/09 [Timekeeper name redacted–(b)(6)]: CLOSING FOR [bank name redacted–(b)(4)];

CONFERENCES. (1.60 HOURS) 

03/09/09 [Timekeeper name redacted–(b)(6)]: REVIEW DOCUMENTS WITH [name redacted–

(b)(6)]. (4.00 HOURS) 

03/18/09 [Timekeeper name redacted–(b)(6)]: REVISE DOCUMENTS. (1.70 HOURS) 

 Administrative – 

03/05/09 [Timekeeper name redacted–(b)(6)]: REVIEW AND ANALYZE INFORMATION 

RELATED TO PROVISION OF SERVICES TO THE DEPARTMENT OF TREASURY AND 

GOVERNMENT CONTRACTS ISSUES RELATED TO SAME; ATTENTION TO STRATEGY 

REGARDING SAME. (2.00 HOURS) 

03/11/09 [Timekeeper name redacted–(b)(6)]: (TREASURY\GENERAL) EMAILS TO TEAM 

REGARDING STATUS. BEGIN PREPARATION OF WEEKLY REPORT TEMPLATE;

CONFERENCE WITH [name redacted–(b)(6)] AND [name redacted–(b)(6)]

REGARDING SAME. (2.00 HOURS) 

Of the amounts questioned by SIGTARP, $3,971 were for administrative 

expenses and fees, such as word processing, preparing fee bills, reviewing the 

OFS contract and task orders, and addressing conflicts of interest issues. As 

specified in the FAR, under labor-hour contracts, hourly rates already include 

wages, indirect costs, and general and administrative expenses. The FDIC Outside 

Counsel Deskbook expressly prohibits fees for invoice preparation or review. 

OFS should have denied these types of administrative charges.

SIGTARP Questioned $57,939 of Bingham’s Legal Fees 

On March 30, 2009, OFS entered into a contract with this law firm to provide 

legal services related to Treasury’s TARP investments related to Small Business 

Administration (“SBA”) loans and securities backed by SBA loans. The contract 

had a $2,000,000 maximum value.17 In total, OFS paid Bingham $270,524 for its 

services under this contract. 

Of the sample of $67,383 of Bingham’s legal fees and expenses SIGTARP 

reviewed, SIGTARP questioned $57,939 that OFS paid to Bingham. At the time 

 

17 Between January 25, 2010, and January 28, 2010, two task orders were awarded under the contract for work performed 

through August 31, 2010.
LEGAL FEES PAID UNDER THE TROUBLED ASSET RELIEF PROGRAM: AN EXPANDED REPORT 20

 

SIGTARP 11-004 September 28, 2011

of the audit, these charges were not supported by adequate documentation because 

they either were block billed, or did not contain enough detail for SIGTARP to 

determine whether the charges were reasonable, as illustrated in the following 

examples: 

 Block Billing – 

06/23/09 [Timekeeper name redacted–(b)(6)]: CONFERENCE WITH [Timekeeper name 

redacted–(b)(6)] AND [Timekeeper name redacted–(b)(6)] REGARDING REVISING 

MPA FOR SENIOR NOTE PROVISIONS; REVISE DRAFT, INCORPORATING CPP TERMS. 

(11.75 HOURS) 

06/24/09 [Timekeeper name redacted–(b)(6)]: CALL WITH TREASURY REGARDING MPA

AND TERM SHEET; INTERNAL DISCUSSIONS REGARDING SAME; REVISE AND 

CIRCULATE MPA AND TERM SHEET. (8.00 HOURS) 

 Inadequate Detail – 

06/15/09 [Timekeeper name redacted–(b)(6)]: CONFERENCE CALL WITH [name redacted–

(b)(6)]; SECOND CALL WITH [name redacted–(b)(6)] AND TREASURY; MEET WITH 

DEAL TEAM. (1.75 HOURS) 

06/15/09 [Timekeeper name redacted–(b)(6)]: TELEPHONE CONFERENCE WITH [name 

redacted–(b)(6)]; TELEPHONE CONFERENCE WITH [name redacted–(b)(6)] AND 

TREASURY. (1.25 HOURS) 

 
LEGAL FEES PAID UNDER THE TROUBLED ASSET RELIEF PROGRAM: AN EXPANDED REPORT 21

 

SIGTARP 11-004 September 28, 2011

The OFS Process for Awarding Legal Service 

Contracts Provided Adequate Price Competition 

In order to determine whether OFS received fair prices for legal services, it was 

necessary to review Treasury’s contracting process with the law firms. As of 

March 31, 2011, OFS had entered into 35 legal service contracts with 21 different 

law firms.18 OFS awarded 15 legal service contracts using a narrowed 

competitive field and compressed timeframes (by citing an unusual and 

compelling urgency as allowed under the FAR); 14 through full and open 

competitions; five using the General Services Administration’s (“GSA”) Federal 

Supply Schedule; and one through simplified acquisition procedures for contracts 

under $100,000. A list of all legal service contracts awarded by OFS is shown in 

Appendix E. 

The Emergency Economic Stabilization Act of 2008 (“EESA”) allowed the 

Secretary of the Treasury to waive any provision of the FAR if the Secretary 

determined that “urgent and compelling circumstances make compliance with 

such provisions contrary to the public interest.” Treasury has not, however, made 

use of this waiver authority in its contracting for legal services. The FAR 

therefore governs OFS’ contracting procedures. 

According to OFS, because of the length of time required to issue contracts using 

full and open competitions,19 OFS awarded contracts for legal services using a 

narrowed competitive field and compressed timeframes as an interim measure. 

The OFS contract files that SIGTARP reviewed showed that at the time the 

contracts in SIGTARP’s sample were being processed in January 2009, OFS was 

also working on an omnibus procurement for legal services. The goal of the 

omnibus procurement was to pre-qualify law firms to provide legal services in 

particular areas so that when a project arose in one of those areas, OFS could 

move quickly to retain one of the prequalified firms. However, because that 

procurement was expected to take three to five months, the omnibus procurement 

would not eliminate the need for other legal procurements awarded based on an 

unusual and compelling urgency. As shown in Appendix E, OFS awarded 

contracts under its omnibus procurement for legal services in August 2010. 

For the contracts SIGTARP reviewed, OFS justified the competitions by citing an 

unusual and compelling urgency, as allowed under FAR 6.302-2.20 In reviewing 

 

18 Additional information on services provided to OFS by other Treasury offices and the responsibilities of Treasury’s 

contracting officer and OFS COTRs is shown in Appendix D. 

19 According to OFS, under normal circumstances: for a large commercial acquisition the requested response time is 

approximately 30 days; for a non-commercial acquisition, approximately six weeks; for a GSA schedule acquisition, 

approximately two weeks; and for a competitive task order from a multiple award indefinite-delivery, indefinitequantity contract the requested response time is approximately 10 days, unless the need is urgent. 20 FAR 6.302-2, Unusual and Compelling Urgency, provides the authority, describes the proper application, and defines 

the limitations of contracts issued using other than full and open competitions justified under this provision.
LEGAL FEES PAID UNDER THE TROUBLED ASSET RELIEF PROGRAM: AN EXPANDED REPORT 22

 

SIGTARP 11-004 September 28, 2011

the sample of competitions conducted by OFS, SIGTARP found that they were in 

compliance with FAR requirements, and were consistent with the OFS acquisition 

procedures that became effective in November 2009. Under the FAR and the 

2009 OFS procedures, OFS was allowed to limit the number of offerors, offeror 

response times, and OFS evaluation times so that contracts could be awarded 

more quickly. Nonetheless, the procedures OFS used for these simplified 

acquisitions included all the key steps in a normal acquisition. 

SIGTARP reviewed the statements of work in contracts awarded to the sampled 

firms to determine whether they were unusually narrow, specific, or otherwise 

appeared to have been steered to a particular contractor. SIGTARP concluded 

that they were sufficiently general and objectively described the tasks required, 

and did not appear to favor any particular contractor. 

Under FAR 6.302-2, Unusual and Compelling Urgency, agencies are required to 

request offers from as many potential sources as practicable under the 

circumstances. When reviewing the solicitations in SIGTARP’s sample, 

SIGTARP found that OFS issued requests for proposals to five to eight law firms 

for each solicitation. SIGTARP’s review of these solicitations showed that OFS 

received from two to six proposals for each solicitation. OFS evaluated each firm 

based on the criteria outlined in its source selection plan, and rated each firm on 

the scale identified in Appendix F to determine which would provide the “best 

value”21 to the Government. 

As described in FAR 8.405-1(c), in addition to price, when determining best 

value, many other factors may be considered. OFS evaluated legal expertise, 

management and staffing approach, mitigation of conflicts of interest, past 

performance, and small business participation. OFS determined that, for each 

solicitation, at least one and up to three of the proposals were technically 

acceptable in all areas evaluated. SIGTARP concluded that OFS adequately 

evaluated all qualified proposals and awarded contracts based on the best value. 

For all proposals received, OFS also evaluated the contractors’ proposed pricing 

to determine whether costs were reasonable. OFS compared the firms’ rates, by 

labor category, to the independent Government cost estimate. OFS then 

compared the total proposed price for all competing law firms with the total 

estimated costs. SIGTARP concluded that OFS had created adequate price 

competition in accordance with FAR 15.403-3(b).22

 

21 As defined in the FAR, “best value” means the expected outcome of an acquisition that, in the Government’s estimation, 

provides the greatest overall benefit in response to the requirement. 22 FAR 15.403-3(b), Adequate price competition, states that “When adequate price competition exists (see [FAR] 

15.403-1(c)(1)), generally no additional information is necessary to determine the reasonableness of price.” Under FAR 

15.403-1(c)(1), Adequate price competition, in general, a price is based on adequate price competition if (i) two or more 

responsible offerors, competing independently, submit priced offers that satisfy the Government’s expressed requirement, 

or (ii) there was a reasonable expectation, based on market research or other assessment, that two or more responsible 

offerors, competing independently, would submit priced offers in response to the solicitation’s expressed requirement, even 

though only one offer is received from a responsible offeror. 
LEGAL FEES PAID UNDER THE TROUBLED ASSET RELIEF PROGRAM: AN EXPANDED REPORT 23

 

SIGTARP 11-004 September 28, 2011

SIGTARP also reviewed the justifications for each sampled contract and found 

OFS to be in compliance with the provisions of FAR 6.303, Justifications, which 

prescribes the required content of such justifications. The justifications were also 

approved by the Treasury competition advocate as required by FAR 6.304, 

Approval of the Justification. Overall, SIGTARP found that OFS followed its 

procedures and FAR requirements and that OFS’ actions were sufficient, given 

the urgent nature related to the need for legal services. Further, once the limited 

competition contracts expired, OFS began awarding contracts using full and open 

competition. 

Finally, SIGTARP compared the hourly rates OFS paid the five law firms to rates 

paid by other Federal entities. Two law firms in SIGTARP’s original sample had 

legal service agreements with FDIC, and one had a GSA Federal Supply 

Schedule.23 SIGTARP contacted FDIC and obtained information regarding rates 

those firms charged FDIC. Although not directly comparable to other law firms 

performing different tasks, the rates were similar and in some cases the rates 

charged OFS were slightly less when compared to rates paid by FDIC and those 

on the GSA Federal Supply Schedule. In addition, SIGTARP compared rates 

published in a National Law Journal article24 to the law firms’ rates charged to 

OFS. Of the firms in SIGTARP’s sample, three had rates published in this article. 

All three firms provided OFS with a discount from those rates, ranging from 31% 

to 44%, when compared to rates published in the article. 

 

23 The Federal Supply Schedule program, also known as the GSA Schedules Program or the Multiple Award Schedule 

Program, is directed and managed by GSA and provides Federal agencies with a simplified process for obtaining 

commercial supplies and services at prices associated with volume buying. Federal Supply Schedules and pricing are 

publically available. 24 Jones, Leigh, “Law Firm Fees Defy Gravity,” The National Law Journal, 12/08/2008, 

http://www.law.com/jsp/nlj/PubArticleNLJ.jsp?id=1202426491654&slreturn=1&hbxlogin, accessed 06/10/2010. 
LEGAL FEES PAID UNDER THE TROUBLED ASSET RELIEF PROGRAM: AN EXPANDED REPORT 24

 

SIGTARP 11-004 September 28, 2011

Update on SIGTARP’s Recommendations Made 

in the Venable Report 

In the Venable report, SIGTARP recommended that OFS adopt the legal fee bill 

submission standards contained in FDIC’s Outside Counsel Deskbook, or 

establish similarly detailed requirements for how law firms should prepare legal 

fee bills and include the new requirements in its open legal service contracts. In 

response, OFS did not specifically adopt FDIC or U.S. Bankruptcy Trustee 

standards, but instead adopted a one-page guidance, which is contained in 

Appendix H, that contains some FDIC or Trustee guidance but is not as detailed. 

Although OFS has not incorporated this guidance into its formal policies, this 

guidance addresses many of the issues in the Venable report as well as in this 

report. For example, the new guidance provides that activities should not be 

block billed, but instead should be billed in six-minute increments, which is an 

important change. The new guidance also requires that there be detailed activity 

descriptions and that any charges for meetings must include key attendees, the 

subject of the meetings, and the participant’s role. It is not clear who is a key 

attendee and why OFS is requiring only that key attendees be listed as opposed to 

any attorney or paralegal. The new guidance also provides that the type of 

activity (such as a phone call or research) be included. Although the type of 

activity is important, as set forth in the Venable report, the FDIC Outside Counsel 

Deskbook contrasts between a description of a time charge for “research,” which 

lacks detail, and one for “legal research on statute of limitations issues,” which 

provides more detail. 

In the Venable report, SIGTARP recommended that OFS develop and incorporate 

into its written policies specific instructions and guidance for OFS COTRs to use 

when reviewing legal fee bills. OFS told SIGTARP that it has held training for its 

COTRs and other staff on its new guidance to law firms and that it will work to 

incorporate relevant portions of its training into written procedures. Because the 

new guidance is one page and is not as detailed as other Federal entities’ best 

practices, the procedures and training for OFS staff in implementing these 

guidelines will be critical. SIGTARP will continue to monitor OFS’ 

implementation of written procedures and its modification of open contracts to 

include the new guidance.

Finally, SIGTARP recommended in the Venable report that OFS review 

previously paid legal fee bills to identify unreasonable or unallowable charges and 

seek reimbursement for those charges as appropriate. OFS agreed to adopt this 

recommendation, but stated that it would review paid invoices in connection with 

contract closeout procedures. OFS recently told SIGTARP that a Treasury 

contracting officer has been assigned to review Venable’s invoices. In addition, 

OFS stated that Treasury is engaged in discussions with Venable regarding 

questioned invoice amounts. However, OFS has not yet sought reimbursement of 

any amounts from Venable.
LEGAL FEES PAID UNDER THE TROUBLED ASSET RELIEF PROGRAM: AN EXPANDED REPORT 25

 

SIGTARP 11-004 September 28, 2011

Conclusions and Recommendations 

For the four law firms reviewed in this report, SIGTARP found weaknesses in 

Treasury’s contracts and payment for legal services under TARP that were similar 

to SIGTARP’s previous report on Venable. The Office of Financial Stability, the 

office within Treasury that administers TARP, has paid the five law firms that 

SIGTARP audited more than $27 million in legal fees and expenses. In 

SIGTARP’s Venable report, SIGTARP questioned $676,840 in legal fees paid by 

OFS because the bills contained block billing, inadequate description of services, 

and administrative tasks being performed by attorneys. To an even greater extent, 

SIGTARP found the same problems in its audit of Treasury’s contracting and 

payment of legal services for four other law firms. The law firms were Simpson 

Thacher & Bartlett LLP, Cadwalader Wickersham & Taft LLP, Locke Lord 

Bissell & Liddell LLP, and Bingham McCutchen LLP. 

SIGTARP audited a judgmental sample of $9.1 million in legal fee bills from 

these four firms paid by OFS under TARP and questioned $8.1 million (89%). 

SIGTARP found that the fee bills contained either no descriptions or vague 

descriptions of work performed, block billing, unsupported expense charges, and 

administrative charges that were not allowed under the contract. As a result, OFS 

would not have been able to assess adequately the reasonableness of the fees it 

paid. Although SIGTARP questioned fee bills from all of the law firms audited, 

this does not mean that all the fees and expenses SIGTARP questioned were 

unreasonable. 

The most striking examples of problematic fee bills were from Simpson Thacher, 

which charged OFS $5.8 million in fees and expenses without providing any 

description of the work performed and without providing any receipts, or 

adequate documentation, for expenses. Although OFS questioned some charges, 

resulting in resubmitted bills, it still paid $5.8 million for original and resubmitted 

bills that had no description of work and no contractually required receipts. OFS 

had no way of knowing whether these fees and expenses were allocable to the 

contract and reasonable and allowable (the requirements for payment under FAR). 

In addition, OFS overpaid Simpson Thacher $68,936 for its foreign subcontractor, 

even though the subcontractor was not preapproved and Simpson Thacher 

charged as much as $520 per hour more than the maximum hourly rate under the 

contract. 

SIGTARP found that OFS’ then-existing legal service contracts and review 

procedures caused it to fall short in comparison to the best practices identified by 

SIGTARP and used by other Federal entities. Although SIGTARP concluded that 

the OFS process for awarding legal service contracts provided adequate price 

competition and that the process complied with FAR requirements, SIGTARP 

found weaknesses in both the OFS contracts with the law firms and OFS policies 

for reviewing legal fee bills. Similar to SIGTARP’s findings in the Venable 

report, the OFS contracts for legal services with these law firms do not contain 
LEGAL FEES PAID UNDER THE TROUBLED ASSET RELIEF PROGRAM: AN EXPANDED REPORT 26

 

SIGTARP 11-004 September 28, 2011

sufficiently detailed requirements or instructions on how law firms should prepare 

fee bills or how they should describe discrete tasks within each fee bill. In 

addition, as stated previously in the Venable report, the OFS COTRs were not 

given specific standards or instructions on how to review legal fee bills for 

accuracy and reasonableness. As a result, in some instances OFS overpaid for 

legal services. 

The lack of specific, documented invoice review procedures also meant that all 

invoices were not subject to the same level or consistency of review. For 

example, in reviewing fee bills from the law firms, some COTRs rejected fee bills 

that included labor categories such as “counsel” not included in the contract, 

while other COTRs approved and paid them. One OFS COTR paid counsel at 

partner rates and another OFS COTR paid them at associate rates. SIGTARP also 

noted that OFS paid for attorneys billed in labor categories other than those 

agreed to in the contract and task orders. While this may have reduced OFS legal 

fees, the substitution of labor categories and rates after contract award was not 

properly documented in contract modifications. In response to the Venable 

report, OFS agreed to adopt new guidance for law firms on submission of fee 

bills. 

SIGTARP reiterates the recommendations that it made in the Venable report. In 

response to SIGTARP’s recommendation made in the Venable report that OFS 

review previously paid legal fee bills to identify unreasonable or unallowable 

charges, and seek reimbursement for those charges, OFS replied that it would 

review contracts for questionable invoice amounts during contract closeout. 

However, OFS should initiate reviews now and not wait until the close of a 

contract to question paid invoices. 

Regarding OFS’ process for awarding legal service contracts, SIGTARP found 

that OFS followed its procedures and FAR requirements and that OFS’ actions 

were sufficient, given the urgent nature related to the need for legal services. In 

addition, although not directly comparable to other law firms performing different 

tasks, the rates were similar and in some cases the rates charged OFS were 

slightly less when compared to rates paid by FDIC and those on the GSA Federal 

Supply Schedule. 

OFS’ legal contracting practices and fee bill review practices in place up to the 

time of our Venable report created an unacceptable risk that Treasury was 

overpaying for legal services. If SIGTARP questioned $8.1 million out of a 

$9.1 million sample, it is highly likely that these billing problems exist outside of 

SIGTARP’s sample. As such, SIGTARP makes the following recommendations: 

1. Treasury should specifically determine the allowability of $7,980,215 in 

questioned, unsupported legal fees and expenses paid to the following law 

firms: 
LEGAL FEES PAID UNDER THE TROUBLED ASSET RELIEF PROGRAM: AN EXPANDED REPORT 27

 

SIGTARP 11-004 September 28, 2011

 Simpson Thacher & Bartlett LLP $5,791,724 

 Cadwalader Wickersham & Taft LLP $1,983,685 

 Locke Lord Bissell & Liddell LLP $146,867 

 Bingham McCutchen LLP (novated from McKee Nelson LLP) $57,939 

2. The Treasury contracting officer should disallow and seek recovery from 

Simpson Thacher & Bartlett LLP for $91,482 in questioned, ineligible fees 

and expenses paid that were not allowed under the OFS contract. Specifically, 

those are $68,936 for labor hours billed at rates in excess of the allowable 

maximums set in contract TOFS-09-0001, task order 1, and $22,546 in other 

direct costs not allowed under contract TOS-09-007, task order 1. 

3. Treasury should promptly review all previously paid legal fee bills from all 

law firms with which it has a closed or open contract to identify unreasonable 

or unallowable charges and seek reimbursement for those charges, as 

appropriate. 

4. Treasury should require in any future solicitation for legal services multiple 

rate categories within the various partner, counsel, and associate labor 

categories. The additional labor rate categories should be based on the 

number of years the attorneys have practiced law. 

5. Treasury should preapprove specified labor categories and rates of all 

contracted legal staff before they are allowed to work on and charge time to 

OFS projects. 
LEGAL FEES PAID UNDER THE TROUBLED ASSET RELIEF PROGRAM: AN EXPANDED REPORT 28

 

SIGTARP 11-004 September 28, 2011

Management Comments and SIGTARP’s Response 

Treasury provided comments on a draft of this report in a memorandum dated 

September 28, 2011. Treasury’s memorandum is reproduced in full in 

Appendix K. 

In its response, Treasury neither agreed nor disagreed with the five 

recommendations regarding OFS’ review and payment of legal fees and related 

costs, but stated that it is committed to working with SIGTARP to address the 

recommendations. SIGTARP will follow up on Treasury’s specific actions to 

address the recommendations. Treasury also stated in its response that it was well 

positioned to judge the quality and value of assistance provided by its contracted 

legal staff and to ensure that taxpayer funds were used wisely. SIGTARP 

disagrees with Treasury’s position on the value it received – OFS received legal 

fee bills that contained block-billed charges, vague and inadequate descriptions of 

work performed, and charges for administrative functions not allowed under the 

contracts. Because OFS did not question these legal fee bills and request more 

detailed information, it could not have determined that amounts billed and paid 

were reasonable. 
SECOND REPORT ON TREASURY’S PROCESS FOR CONTRACTING FOR PROFESSIONAL SERVICES UNDER TARP 29

 

SIGTARP 11-004 September 28, 2011

Appendix A – Scope and Methodology 

SIGTARP performed this audit under authority of Public Law 110-343, as amended, which also 

incorporates the duties and responsibilities of inspectors general under the Inspector General Act 

of 1978, as amended. SIGTARP initiated this audit at the request of Senator Tom Coburn, M.D. 

The audit’s objectives were to examine the processes used to ensure that (1) professional services 

contract prices are fair and reasonable; and (2) invoices submitted by the contractors accurately 

reflect the work performed. For one law firm, Venable LLP, SIGTARP reported results on 

April 14, 2011, related to the second objective in audit report number SIGTARP-11-003,

“Treasury’s Process for Contracting for Professional Services under the Troubled Asset Relief 

Program.”

To determine how OFS established and implemented contracting procedures, including those 

regarding conflicts of interest, SIGTARP interviewed procurement officials in OFS and 

Treasury’s Procurement Services Division. SIGTARP reviewed relevant Treasury policies and 

procedures issued before OFS was created that were used by OFS until it issued its own policies. 

SIGTARP also reviewed OFS contracts with law firms to understand the services to be provided 

and any billing requirements included in the contracts. 

To determine whether OFS policies and procedures were effective, SIGTARP audited a sample 

of invoices paid by OFS for legal services (“fee bills”) submitted by a sample of law firms and 

paid by OFS. Five law firms were judgmentally selected, based on Congressional interest and 

the dollar value of awarded contracts. SIGTARP selected the following five law firms for audit: 

 Simpson Thacher & Bartlett LLP; 

 Cadwalader Wickersham & Taft LLP; 

 Locke Lord Bissell & Liddell LLP; 

 Bingham McCutchen LLP (which merged with McKee Nelson LLP); and 

 Venable LLP. 

Audit fieldwork included tests of transactions and interviews conducted at OFS offices in 

Washington, D.C. Additional tests and interviews, including a walk-through of billing practices 

and procedures and reviews of timekeeping and billing policies, were conducted in the law 

offices of Locke Lord Bissell & Liddell in Washington, D.C., and Venable LLP in Baltimore, 

Maryland. As shown in Table 2, the scope of the audit covered all $26.9 million in payments to 

the five law firms made between October 3, 2008 – the inception of TARP – and March 31, 

2011. For that period, SIGTARP selected for audit $10.1 million in payments OFS made to the 

five law firms. 
SECOND REPORT ON TREASURY’S PROCESS FOR CONTRACTING FOR PROFESSIONAL SERVICES UNDER TARP 30

 

SIGTARP 11-004 September 28, 2011

TABLE 2 

AUDITED PAYMENTS TO LAW FIRMS 

Law Firm Contract Number 

Paid Legal Fees 

and Expenses 

 as of 3/31/2011 Audited 

Percent 

Audited 

Simpson Thacher & Bartlett LLP 

TOFS-09-0001 $1,530,023 $1,530,023 100% 

TOFS-09-0009 3,422,0931 3,422,093 100% 

TOS-09-007 931,090 931,090 100% 

Cadwalader Wickersham & Taft LLP2

TOFS-09-D-0006 17,392,786 2,869,998 17% 

TOFS-09-D-0011 1,278,696 0 0% 

TOS-09-020 409,955 0 0% 

Locke Lord Bissell & Liddell LLP TOS-09-022 272,243 272,243 100% 

Bingham McCutchen LLP 

(novated from McKee Nelson LLP) TOFS-09-D-0005 270,524 67,383 25% 

Subtotal Related to This Report $25,507,410 $9,092,830 36% 

Venable LLP3 TOFS-09-D-0002 1,394,723 1,027,049 74% 

Total for This Audit $26,902,133 $10,119,879 38% 

Notes: Numbers affected by rounding. 

1

 Simpson Thacher’s contract number TOFS-09-0009 is still active. Between 02/04/2011, when OFS provided SIGTARP fee bills for audit, and 

03/31/2011, OFS paid additional Simpson Thacher fee bills totaling $83,824. The additional fee bills were not subject to SIGTARP’s audit. 2

 OFS awarded contract number TOFS-10-D-0006 to Cadwalader Wickersham & Taft after SIGTARP’s audit began. It was, therefore, not subject to 

audit. As of 03/31/2011, $3,789,815 had been obligated and $992,237 was expended under this contract. 3 All amounts shown for Venable LLP were previously reported in audit report number SIGTARP 11-003, “Treasury’s Process for Contracting for 

Professional Services under TARP,” issued April 14, 2011, and are shown here for comparative purposes only.

Source: SIGTARP analysis of data provided by OFS. 

SIGTARP conducted this performance audit in accordance with generally accepted government 

auditing standards prescribed by the Comptroller General of the United States. Those standards 

require that SIGTARP plan and perform the audit to obtain sufficient, appropriate evidence to 

provide a reasonable basis for findings and conclusions based on the audit objectives. SIGTARP 

conducted this audit from May 2010 through May 2011. SIGTARP believes that the evidence 

obtained provides a reasonable basis for the findings and conclusions based on the audit 

objective. 

Limitations on Data 

SIGTARP was unable to collect complete timekeeping information for attorneys providing legal 

services to OFS. One law firm asserted that disclosing descriptions of tasks performed for the 

firm’s other clients would violate those clients’ attorney-client privileges, and, therefore, 

SIGTARP did not collect this information from any of the law firms. Without this information, 

SIGTARP was not able to determine whether OFS was paying for duplicated or recycled 

attorney work products. In addition, entities performing work under contract to OFS in support 

of TARP are required to disclose organizational conflicts of interest. Certifications regarding 

conflicts of interest are required from contractors (“self-certifications”), and OFS has indicated 

that it has no process for independently verifying self-certifications. Because contractors selfidentify conflicts of interest, instances of non-compliance could have been omitted. 
SECOND REPORT ON TREASURY’S PROCESS FOR CONTRACTING FOR PROFESSIONAL SERVICES UNDER TARP 31

 

SIGTARP 11-004 September 28, 2011

Use of Computer-Processed Data 

SIGTARP did not use OFS computer-processed data during this audit. Legal fee bills were not 

submitted electronically by law firms or processed electronically by OFS. 

Internal Controls 

As part of this audit, SIGTARP reviewed Locke Lord Bissell & Liddell’s and Venable’s internal 

control framework for collecting and reporting time charges. SIGTARP also examined OFS 

controls for contract issuance and administration. 

Prior Coverage 

As stated above, SIGTARP issued an earlier report as part of this audit. No other audits with the 

same or similar audit objectives have been performed on OFS’ process for contracting for 

professional services under the Troubled Asset Relief Program. 
SECOND REPORT ON TREASURY’S PROCESS FOR CONTRACTING FOR PROFESSIONAL SERVICES UNDER TARP 32

 

SIGTARP 11-004 September 28, 2011

Appendix B – Potential Billing Issues 

Fees for Labor Description 

SIGTARP 

Classification1

Administrative Tasks Invoice preparation, review, or corrections to an invoice required by the OFS contracting 

officer’s technical representative or Treasury’s contracting officer. Unallowable 

Block Billing Aggregating or lumping together multiple tasks in the same time charge, collectively 

totaling more than 0.5 hours. Unsupported2

Clerical Fees Hourly fees for time spent photocopying, sending facsimiles, etc. Unallowable 

Clerical Overtime Secretarial or clerical overtime that has not been approved by the OFS contracting 

officer’s technical representative. Unallowable 

Contract Review Proposal/Task Order/Contract Review. (Administrative items added by SIGTARP.) Unallowable 

Excessive Conferences Excessive intra-office conferences between attorneys or paralegals for the purpose of 

providing instruction or status. Unsupported 

Excessive Review Excessive time spent in “file review.” Unsupported 

Excessive Revision Excessive time spent in “review and revision” of documents. Unsupported 

Excessive Staff Excessive number of attorneys performing services on a matter. Unsupported 

Inadequate Description Insufficient or incomplete description of tasks (for example: “research”). Unsupported 

Labor Category 

Charging attorney time for tasks that should be performed efficiently and effectively at 

less expense by a paralegal or secretary, or charging paralegal time for tasks that 

should be performed by clerical workers. 

Unsupported 

Labor Rate Hours charged at a more senior attorney rate when a matter should be handled by a less 

senior attorney. Unsupported 

Training Time Educational or development costs to become generally familiar with statutory and case 

law affecting Treasury. Unallowable 

Unapproved Staff Services of billable individuals who have not been included on the approved rate 

schedule. Unsupported 

Unapproved Task Legal work on matters not approved (work should be tied to Statement of Work). Unallowable 

Value Billing Value billing (billing based on the value of the information or service provided rather than 

billing based on time spent). Unallowable 

Other Direct Costs Description 

SIGTARP 

Classification 

Commuting Daily commuting expenses. Unallowable 

Copies In-house photocopying charges at more than $0.08 per copy. Unallowable 

Copying Clerical time for photocopying, sending facsimiles, filing, etc. Unallowable 

Filings Any costs relating to filing fees in U.S. District Courts or Courts of Appeal, which OFS is 

not required to pay (pursuant to 12 U.S.C. 1819(b)(4)). Unallowable 

Postage Ordinary postage (other than express, messenger, etc.). Unallowable 

Research Charges other than “actual time” charges for electronic research (Westlaw, Lexis, etc.). Unallowable 

Tax Sales tax (except for lodging) or surcharges imposed by utilities or telephone services. Unallowable 

Training Charging attorney time for preparing and presenting training to OFS. Unallowable 

Travel Approved travel time at 50% of approved timekeeper rate. Allowable 

Note: Not all potential billing issues were identified during SIGTARP’s review of fee bills. 

1 Under FAR 31.201-2, Determining Allowability, a cost is “allowable” only when it complies with all of the following five requirements. The cost must: 

(1) be reasonable (not exceed that which would be incurred by a prudent person in the conduct of a competitive business), (2) be allocable (incurred 

specifically for the contract), (3) meet standards promulgated by the Cost Accounting Standards Board or generally accepted accounting principles, 

(4) be within the terms of the contract, and (5) be within any limitations set forth in FAR Subpart 31.2, which prescribes the determination and proper 

treatment of costs in Government contracts with commercial organizations. 

2 A cost is “unsupported” if, at the time of the audit, the cost is not supported by adequate documentation; for example, if the description of the associated 

task does not contain enough information to determine whether the task meets the five requirements to be “allowable,” as shown in Note 1. 

Source: FDIC Outside Counsel Deskbook, with administrative tasks related to contract and task order review, and value billing, added by SIGTARP.
SECOND REPORT ON TREASURY’S PROCESS FOR CONTRACTING FOR PROFESSIONAL SERVICES UNDER TARP 33

 

SIGTARP 11-004 September 28, 2011

Appendix C – Questioned Legal Fees by Category 

Category 

Fee or Cost 

Billing Issue 

Simpson 

Thacher & 

Bartlett LLP 

Cadwalader 

Wickersham 

& Taft LLP

Locke Lord 

Bissell & 

Liddell LLP

Bingham 

McCutchen 

LLP (novated 

from McKee 

Nelson LLP)

Subtotal

Related

to This

Report

Venable 

LLP1

Total 

for

This 

Audit

Block Billed $0 $1,841,336 $107,955 $40,724 $1,990,015 $416,797 $2,406,812

Administrative 

Tasks 0 0 3,971 0 3,971 20,638 24,609

Inadequate Detail 5,855,374 33,058 10,717 863 5,900,012 12,265 5,912,277

Labor Category 0 14,304 0 0 14,304 0 14,304

Travel (50% of 

full hourly rate) 0 3,091 0 0 3,091 0 3,091

Block Billed and 

Administrative 

Tasks 0 0 14,726 0 14,726 34,086 48,812

Block Billed and 

Inadequate Detail 0 15,394 9,498 16,352 41,244 191,638 232,882

Block Billed and 

Labor Category 0 21,574 0 0 21,574 0 21,574

Block Billed 

and Travel 0 44,825 0 0 44,825 0 44,825

Inadequate Detail 

and Labor 

Category 0 3,979 0 0 3,979 0 3,979

Block Billed, 

Administrative 

Tasks, and 

Inadequate Detail 0 0 0 0 0 1,416 1,416

Block Billed, 

Inadequate Detail, 

and Travel 0 2,013 0 0 2,013 0 2,013

Copying Costs 

(over 8¢ per copy) 0 1,493 0 0 1,493 0 1,493

No Receipts 

Provided for 

Other Costs 5,286 0 0 0 5,286 0 5,286

Other Costs Not 

Allowed 

Under the Contract 22,546 0 0 0 22,546 0 22,546

Research Costs 0 2,618 0 0 2,618 0 2,618

Total $5,883,206 $1,983,685 $146,867 $57,939 $8,071,697 $676,840 $8,748,537
SECOND REPORT ON TREASURY’S PROCESS FOR CONTRACTING FOR PROFESSIONAL SERVICES UNDER TARP 34

 

SIGTARP 11-004 September 28, 2011

Appendix D – Contracting Services Provided to OFS by 

Other Treasury Offices and Responsibilities of Contracting 

Officers and Contracting Officer’s Technical 

Representatives 

OFS manages TARP, with key support services provided by other Treasury offices. For 

example, the Procurement Services Division solicits, negotiates, and awards contracts on behalf 

of OFS. Under FAR 1.602, Contracting Officers, only contracting officers are granted the 

authority to enter into, administer, and terminate contracts on behalf of the Government. 

Contracting officers are also responsible for ensuring performance of all necessary actions for 

effective contracting, ensuring compliance with the terms of the contract, and safeguarding the 

interests of the United States in its contractual relationships. 

Within the Procurement Services Division, Treasury’s contracting officers are delegated the 

authority to administer and/or terminate contracts on behalf of Treasury. The Department of the 

Treasury Acquisition Regulation, which supplements the FAR, allows the contracting officer to 

delegate certain responsibilities to a COTR.25 Accordingly, for each contract, the contracting 

officer appoints a COTR through a letter of designation, after the COTR is nominated by the 

program office.26 The letter of designation describes the authority as well as specific 

responsibilities of the COTR. Each contract identifies the responsible COTR. 

The contracting officer maintains the official contract file for all OFS procurements. However, 

while the contract is active, the COTR also creates and maintains working files to facilitate the 

contract management process. When the contract is complete, the COTR files are sent to the 

contracting officer and become part of the official contract file. The COTR also: 

 monitors contractor performance to ensure that products and services conform to contract 

requirements; 

 provides “technical direction” to the contractor within the scope of the contract’s 

specifications or work statements, such as instructions that direct or redirect work, shift 

the work between work areas or locations, fill in details regarding the work, and ensure 

tasks outlined in work statements are accomplished satisfactorily; 

 assesses and reports on the contractor’s performance; 

 authorizes payments to the contractor; and 

 creates and maintains records of the administration of each contract. 

 

25 The Department of the Treasury Acquisition Regulation states: “Requisitioning offices must nominate to the 

contracting officer an individual to act as the contracting officer’s technical representative in the administration 

and monitoring of a contract. Selection is to be based on the technical expertise and experience of the 

individual...” The COTRs’ authorities and responsibilities are communicated to them in their COTR Designation 

Memorandum, which is prepared for each contract. 26 Treasury program offices receiving support services through contracts are required to nominate a COTR in 

accordance with the Department of the Treasury Acquisition Regulation, which supplements the FAR. 
SECOND REPORT ON TREASURY’S PROCESS FOR CONTRACTING FOR PROFESSIONAL SERVICES UNDER TARP 35

 

SIGTARP 11-004 September 28, 2011

Until September 2009, OFS used procedures issued by Treasury’s Procurement Services 

Division (“Treasury’s procedures”). Treasury’s procedures state that the COTR is responsible 

for, among other items, “Reviewing contractor invoices and supporting documentation for 

certification,” but include no specific instructions beyond that requirement. Moreover, while 

Treasury’s procedures address a broad array of procurement functions, such as tracking invoices 

and vouchers, they do not address precise activities required of COTRs in conducting reviews of 

legal fee bills or similar bills. 

After September 2009, OFS established its own procedures. SIGTARP reviewed OFS 

“Contracting Officer Technical Representative (COTR) Nomination and File Organization 

Procedures” (“COTR procedures”) and OFS “Administration Procedures” to determine whether 

these procedures are sufficient to ensure that payments are made only for invoices submitted by 

contractors that adequately and accurately reflect the work performed and that only include 

allowable costs. The COTR procedures state, in Section 4.3.1.2, Contract Performance 

Management, that COTR duties may include, “Reviewing contractor invoices to ensure costs are 

allocable to the contract, allowable pursuant to financial regulations, and reasonable.” However, 

the procedures do not provide specifics on allowable and unallowable costs, services, and 

charges; nor are COTRs separately provided this information as a guide to perform reviews of 

the fee bills. The OFS procedures are similar to Treasury’s procedures discussed earlier in that 

they do not provide specific instructions or guidelines that would serve as a basis for COTRs to 

review and question invoices. 

Although the OFS COTR procedures make no reference to the FAR regarding what is allowable, 

because the Secretary of the Treasury has not waived any provision of the FAR, the FAR still 

governs OFS contracts. Under FAR 31.201-2, Determining Allowability, a cost is allowable 

only when it complies with all of the following five requirements. The cost must: (1) be 

reasonable (not exceed that which would be incurred by a prudent person in the conduct of a 

competitive business), (2) be allocable (incurred specifically for the contract), (3) meet standards 

promulgated by the Cost Accounting Standards Board or generally accepted accounting 

principles, (4) be within the terms of the contract, and (5) be within any limitations set forth by 

FAR Subpart 31.2, which prescribes the determination and proper treatment of costs in 

Government contracts with commercial organizations. 

Treasury’s standard operating procedure for invoice control, dated February 28, 1994, state that a 

COTR’s responsibilities include, “Reviewing contractor invoices and supporting documentation 

for certification.” Section IV, Responsibilities of a COTR, also lists other responsibilities: 

The COTR is designated ... to furnish technical clarification, monitor contract performance and maintain an 

arm’s length relationship with the contractor throughout the term of his appointment. The COTR’s technical 

knowledge in the areas of performance covered by the contract allows him to function as the Government 

representative most capable of providing technical direction to the contractor. Generally, a COTR’s 

responsibilities include: 

a. Controlling all Government technical interface with contractor personnel; 

b. Assuring that appropriate action is taken on technical correspondence pertaining to contract/delivery 

orders and ensuring that adequate files are maintained; 

c. Furnishing documentation on any request for change, deviation, or waiver to the contracting officer for 

action; 

d. Reviewing contractor invoices and supporting documentation for certification; 
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SIGTARP 11-004 September 28, 2011

e. Notifying the contracting officer of performance problems and recommending corrective action; 

f. Reviewing contract deliverables and accepting/rejecting them; 

g. Evaluating contractor proposals and developing Government estimates; 

h. Preparing contractor performance evaluations; and 

i. Accounting [for] and monitoring any Government furnished property. 

OFS “Contracting Officer Technical Representative (COTR) Nomination and File Organization 

Procedures,” dated November 30, 2009, state, in Section 4.3.1.2, Contract Performance 

Management, that COTR duties may include, “Reviewing contractor invoices to ensure costs are 

allocable to the contract, allowable pursuant to financial regulations, and reasonable.” 

Specifically, the section 4.3, COTR Duties, states in part: 

4.3.1. COTR’s duties can be categorized as acquisition planning; proposal evaluation and negotiation; and 

performance management. Specific COTR responsibilities may include: 

 1. Acquisition planning 

 a. Gathering requirements and drafting statements of work or related documents 

 b. Conducting market research to identify qualified sources 

 c. Preparing documentation to support Program and contract determinations and 

 d. Evaluating contractor proposals for technical and performance

 2. Contract performance management 

 a. Hosting post-award orientations 

 b. Conducting regular meetings and maintain[ing] effective communications with contractor 

management 

 c. Preparing periodic cost accrual and contact performance reports

 d. Reviewing contractor invoices to ensure costs are allocable to the contract, allowable pursuant to 

financial regulation, and reasonable

 e. Coordinating audits of contractor records as required 

 f. Providing technical direction and work authorization

 g. Performing quality assurance reviews of contractor products or services to ensure compliance with 

contract terms and conditions 

 h. Managing COTR files 

 i. Overseeing contract logistics requirements, such as information technology, security, facilities, 

and government furnished property
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SIGTARP 11-004 September 28, 2011

Appendix E – OFS Legal Service Contracts 

(Issued October 3, 2008, through March 31, 2011) 

Date of 

Award 

Contract 

Number Vendor Purpose 

Obligated 

Value 

Expended

Value

Contracts Awarded through Limited Competition Citing Unusual and Compelling Urgency 

10/10/08 TOS-09-007 Simpson Thacher & 

Bartlett MNP LLP 

Legal services for the 

implementation of TARP $931,090 $931,090 

11/07/08 TOS-09-010A Sonnenschein Nath & 

Rosenthal LLP 

Legal services related to auto 

industry loans $2,722,326 $2,702,441 

01/27/09 TOS-09-020 Cadwalader Wickersham 

& Taft LLP Bankruptcy legal services $409,955 $409,955 

02/12/09 TOS-09-022 Locke Lord Bissell 

& Liddell LLP 

Initiate interim legal services in 

support of Treasury 

investments under EESA 

$272,243 $272,243 

02/20/09 TOFS-09-D-0001 Simpson Thacher & 

Bartlett MNP LLP Capital Assistance Program (I) $2,047,872 $1,530,023 

02/20/09 TOFS-09-D-0002 Venable LLP Capital Assistance Program (II) 

Legal Services $1,394,724 $1,394,724 

03/30/09 TOFS-09-D-0005 Bingham McCutchen LLP 

Small Business Administration 

initiative, legal services – 

contract novated from McKee 

Nelson LLP 

$422,355 $270,524 

03/30/09 TOFS-09-D-0006 Cadwalader Wickersham 

& Taft LLP Auto investment legal services $17,392,786 $17,392,786 

03/30/09 TOFS-09-D-0007 Haynes and Boone LLP Auto investment legal services $345,746 $345,746 

03/30/09 TOFS-09-D-0004 Sonnenschein Nath & 

Rosenthal LLP Auto investment legal services $1,834,193 $1,834,193 

05/26/09 TOFS-09-D-0010 Anderson, McCoy & Orta 

Legal services for work under 

Treasury’s Public-Private 

Investment Fund (PPIF) 

program 

$4,068,834 $2,286,996 

05/26/09 TOFS-09-D-0009 Simpson Thacher & 

Bartlett MNP LLP 

Legal services for work under 

Treasury’s Public-Private 

Investment Fund (PPIF) 

program 

$7,849,026 $3,505,917 

07/30/09 TOFS-09-D-0011 Cadwalader Wickersham 

& Taft LLP1 Restructuring legal services $2,049,979 $1,278,696 

07/30/09 TOFS-09-D-0012 Debevoise & Plimpton LLP Restructuring legal services $159,175 $1,650 

07/30/09 TOFS-09-D-0013 Fox, Hefter, Swibel, Levin 

& Carol, LLP Restructuring legal services $84,125 $26,493 

 Subtotals $41,984,429 $34,183,477

Contracts Awarded Using Simplified Acquisition Procedures for Contracts under $100,000 

09/17/10 TOFS-10-O-0021 Bingham McCutchen LLP 

Small Business Administration 

Section 7(a) Security Purchase 

Program 

$19,975 $11,177 

 
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SIGTARP 11-004 September 28, 2011

 

Contracts Awarded through Full and Open Competition

12/10/08 TOS-09-014C Sonnenschein Nath & 

Rosenthal LLP 

Legal services for the purchase 

of asset-backed securities $249,999 $102,769 

08/06/10 TOFS-10-D-0005 Alston & Bird LLP Omnibus procurement for legal 

services $1,285,416 $2,277 

08/06/10 TOFS-10-D-0006 Cadwalader Wickersham 

& Taft LLP 

Omnibus procurement for legal 

services $3,789,815 $992,237 

08/06/10 TOFS-10-D-0007 Fox, Hefter, Swibel, Levin 

& Carol, LLP 

Omnibus procurement for legal 

services $181,200 $660 

08/06/10 TOFS-10-D-0008 Haynes and Boone, LLP Omnibus procurement for legal 

services —2 —

08/06/10 TOFS-10-D-0009 Hughes Hubbard & 

Reed LLP 

Omnibus procurement for legal 

services $113,655 $107,301 

08/06/10 TOFS-10-D-0010 Love & Long LLP Omnibus procurement for legal 

services —2

 —

08/06/10 TOFS-10-D-0011 Orrick Herrington 

Sutcliffe LLP 

Omnibus procurement for legal 

services —2

 —

08/06/10 TOFS-10-D-0012 Paul, Weiss, Rifkind, 

Wharton & Garrison LLP 

Omnibus procurement for legal 

services $3,565,041 $294,118 

08/06/10 TOFS-10-D-0013 Perkins Coie LLP Omnibus procurement for legal 

services —2

 —

08/06/10 TOFS-10-D-0014 Seyfarth Shaw LLP Omnibus procurement for legal 

services —2

 —

08/06/10 TOFS-10-D-0015 Shulman, Rogers, Gandal, 

Pordy & Ecker, PA 

Omnibus procurement for legal 

services $313,725 —

08/06/10 TOFS-10-D-0016 Sullivan Cove Reign 

Enterprises JV 

Omnibus procurement for legal 

services —2

 —

08/06/10 TOFS-10-D-0017 Venable LLP Omnibus procurement for legal 

services $498,100 $190 

 Subtotals $9,996,951 $1,499,552 

Contracts Awarded through General Services Administration Federal Supply Schedule 

10/29/08 T09BPA-002 Hughes Hubbard & 

Reed LLP 

Legal services for the Capital 

Purchase Program $3,060,921 $2,835,357 

10/29/08 T09BPA-001 Squire, Sanders & 

Dempsey LLP 

Legal services for the Capital 

Purchase Program $5,787,939 $2,687,999 

12/22/09 TOFS-10-B-0001 Hughes Hubbard & 

Reed LLP 

Document production services 

and litigation support $1,097,205 $699,683 

04/08/10 TOFS-10-B-0002 Squire, Sanders & 

Dempsey LLP Housing legal services $1,229,350 $774,012 

07/22/10 TOFS-10-G-0007 Schiff Hardin LLP Housing legal services $537,375 $97,526 

 Subtotals $11,712,790 $7,094,577 

Total Obligations and Expenditures $63,714,145 $42,788,782

Notes: Numbers may not total due to rounding. 

1 $1.4 million deobligation submitted on 09/30/2010. 2 If no task orders have been awarded, no funds are obligated. 

Source: OFS. 
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SIGTARP 11-004 September 28, 2011

Appendix F – OFS Proposal Evaluation Rating Scale and 

Definition of Rating Terms 

Evaluation Rating Scale

OFS Technical Evaluation Panels evaluated all non-price factors in legal service contract 

proposals by providing adjectival ratings using the following evaluation rating scale: 

Outstanding (O) – Meets all requirements of the Request for Proposal (“RFP”) and provides 

significant advantages to the Government. A rating of outstanding is consistent with a judgment 

that the proposal presents an extremely low risk of poor performance to the Government. 

Good (G) – Meets all requirements of the RFP and provides advantages to the Government. A 

rating of good is consistent with a judgment that the proposal presents a low risk of poor 

performance to the Government. 

Satisfactory (S) – Meets all requirements of the RFP. A rating of satisfactory is consistent with 

the judgment that the proposal presents an average risk of poor performance to the Government. 

Marginal (M) – Meets most or some requirements of the RFP, but is either significantly weak 

on an RFP requirement, weak on a high number of RFP requirements, or vague with respect to 

the firm’s ability to meet certain RFP requirements. A rating of marginal is consistent with the 

judgment that the proposal presents an above average risk of poor performance to the 

Government. 

Unsatisfactory (U) – Does not meet the requirements of the RFP. A rating of unsatisfactory is 

consistent with one or more significant weaknesses, a deficiency, or a non-responsive proposal. 

This rating is consistent with the judgment that the proposal presents a high risk of poor 

performance to the Government. 

Identification of Strengths, Weaknesses, Significant Weaknesses and Deficiencies

The following are the definitions of these terms: 

Term Definition 

Strength 

A quality element in the proposal that appreciably (measurably, 

perceptibly) increases the chances of successful contract performance or 

provides an advantage to the Government. 

Weaknesses A flaw in the proposal that increases the risk of unsuccessful contract 

performance. 

Significant 

Weakness 

A flaw in the proposal that significantly increases the risk of unsuccessful 

contract performance. 

Deficiency A flaw in the proposal that calls into question the ability of the contractor 

to perform the work in the Statement of Work. 
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Appendix G – Payment-Related FAR Clauses 

Incorporated into OFS Contracts 

In the contracts audited by SIGTARP, the Federal Acquisition Regulation (“FAR”) was 

referenced in the contracts, which stated: “This contract incorporates one or more [FAR] clauses 

by reference, with the same force and effect as if they were given in full text.” The following 

two FAR clauses dealing with payments to contractors were incorporated by reference into the 

contracts: 

 FAR 52.232-1, Payments, which states in part: 

The Government shall pay the Contractor, upon the submission of proper invoices or vouchers, the 

prices stipulated in this contract for supplies delivered and accepted or services rendered and 

accepted, less any deductions provided in this contract. Unless otherwise specified in this contract, 

payment shall be made on partial deliveries accepted by the Government if— 

(a) The amount due on the deliveries warrants it; or 

(b) The Contractor requests it and the amount due on the deliveries is at least $1,000 or 

50 percent of the total contract price. 

 FAR 52.232-7, Payments under Time-and-Materials and Labor-Hour Contracts, provides 

general instructions on payment of invoices. The clause states in part: 

The Government will pay the Contractor as follows upon the submission of vouchers approved by 

the Contracting Officer or the authorized representative: 

(a) Hourly rate. 

(1) Hourly rate means the rate(s) prescribed in the contract for payment for labor that 

meets the labor category qualifications of a labor category specified in the contract that 

are— 

(i) Performed by the Contractor; 

(ii) Performed by the subcontractors; or 

(iii) Transferred between divisions, subsidiaries, or affiliates of the Contractor under 

a common control. 

(2) The amounts shall be computed by multiplying the appropriate hourly rates prescribed 

in the Schedule by the number of direct labor hours performed. 

(3) The hourly rates shall be paid for all labor performed on the contract that meets the 

labor qualifications specified in the contract. Labor hours incurred to perform tasks for 

which labor qualifications were specified in the contract will not be paid to the extent 

the work is performed by employees that do not meet the qualifications specified in the 

contract, unless specifically authorized by the Contracting Officer. 

(4) The hourly rates shall include wages, indirect costs, general and administrative 

expenses, and profit. Fractional parts of an hour shall be payable on a prorated basis. 

(5) Vouchers may be submitted once each month (or at more frequent intervals, if 

approved by the Contracting Officer), to the Contracting Officer or authorized 

representative. The Contractor shall substantiate vouchers (including any 

subcontractor hours reimbursed at the hourly rate in the schedule) by evidence of actual 

payment and by— 

(i) Individual daily job timekeeping records; 

(ii) Records that verify the employees meet the qualifications for the labor categories 

specified in the contract; or 

(iii) Other substantiation approved by the Contracting Officer.
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Appendix H – New OFS Guidance to Its Outside Counsel 

on Legal Fee Bill Submission and Format 

 From: [name redacted–(b)(6)]

Sent: Thursday, March 03, 2011 11:26 AM

Subject: Additional Guidance re Invoice Submission and Formatting Instructions

Dear OFS Contractor:    

     

In an effort to standardize the procedures for all contractors in the submission of proper

legal services invoices, listed below is guidance regarding invoice submission, invoice

format and other direct costs.  This guidance should be considered as supplementary only

to your base contract and individual task orders, which shall supersede anything

contained herein to the contrary.  Please ensure that your March 2011 billing and all

billing going forward conforms to the following standards:

A. Invoice Submission Instructions

Please refer to your base contract regarding invoicing and payment instructions. In

addition, please use the following guidance in the preparation and submission of monthly

invoices:

1. Invoices should include your firm name, your DUNS number and the date.

2. Invoices should be issued separately for each task order under your base contract.  Please

indicate the contract and task order number as well as the invoice number on the cover page

of each invoice.  Any Purchase Requisition number assigned to the task order by Treasury

should also be listed. [COTRs to supply PR numbers to contractors as needed).

3. Invoices should be submitted for each calendar month.

4. Review bill prior to submission to ensure that it is within the labor hour categories and

hourly rate maximums required by the task order and that only allowable expenses are

charged as described in the task order and the other direct cost section of the base

contract if such costs have been awarded in the task order.

5. Do not bill for a service or cost that is customarily included in the normal overhead or

administrative expense of running a law firm (monthly bill preparation often falls in this

category).

B. Invoice Formatting and Instructions

In general, each entry shall include activity descriptions that are sufficiently detailed

to allow the COTR to determine whether all the time, or any portion thereof, is actual,

reasonable, and necessary and shall include the following:  

1. All activity descriptions shall be divided into general project categories of time.

2. All entries shall include complete and detailed activity descriptions without the use of

acronyms.

3. Each activity description shall include a time allotment.  

4. Activities shall be billed in increments of one‐tenth of an hour (six minutes).

5. Each activity description shall include the type of activity (e.g., phone call, research).  

6. Each activity description shall include the subject matter where task orders have multiple

subjects.  

7. Activity descriptions shall not be lumped or block‐billed, i.e., each activity shall have a

separate description and a time allotment.  

8. The activity descriptions shall individually identify all meetings and hearings, other key

attendees in the firm or at Treasury, the subject(s) of the meeting or hearing, and the

participant's role.

9. Activity descriptions shall be presented chronologically, or chronologically within each

project category.

10. All travel shall be approved in writing by the Contracting Officer or Contracting Officer

Technical Representative prior to the occurrence of the travel.

C. Other Direct Costs:

For task orders that provide for other direct costs, please refer to your base contract

regarding allowable and non‐allowable costs and travel reimbursement procedures.
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Appendix I – Acronyms and Abbreviations 

Acronym Definition 

CAP Capital Assistance Program 

CO Contracting Officer 

COTR Contracting Officer’s Technical Representative 

CPP Capital Purchase Program 

EESA Emergency Economic Stabilization Act of 2008 

FAR Federal Acquisition Regulation 

FDIC Federal Deposit Insurance Corporation 

GSA General Services Administration 

OFS Office of Financial Stability 

PPIF Public-Private Investment Fund 

PPIP Public-Private Investment Program 

RFP Request for Proposal 

SBA Small Business Administration 

SIGTARP Office of the Special Inspector General for the Troubled Asset Relief Program 

TARP Troubled Asset Relief Program 
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Appendix J – Audit Team Members 

This audit was conducted and the report was prepared under the direction of Kurt Hyde, Deputy 

Special Inspector General for Audit and Evaluation, in the Office of the Special Inspector 

General for the Troubled Asset Relief Program. The staff members who conducted the audit and 

contributed to the report include Leah DeWolf, Brenda James, Danial Olberding, Sarah Reed, 

and Trevor Rudolph. 
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Appendix K – Management Comments 

 
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SIGTARP Hotline 

If you are aware of fraud, waste, abuse, mismanagement, or misrepresentations associated with the Troubled 

Asset Relief Program, please contact the SIGTARP Hotline. 

By UOnline FormU: Uwww.SIGTARP.govU By Phone: Call toll free: (877) SIG-2009 

By Fax: (202) 622-4559 

By Mail: Hotline: Office of the Special Inspector General

for the Troubled Asset Relief Program

1801 L Street., NW, 3rd Floor 

Washington, D.C. 20220

Press Inquiries 

If you have any inquiries, please contact our Press Office: 

Julie Vorman 

Acting Director of Communications 

U

Julie.Vorman@treasury.gov

202-927-1310 

Legislative Affairs 

For Congressional inquiries, please contact our Legislative Affairs Office: 

Lori Hayman 

 Director of Legislative Affairs 

 ULori.Hayman@treasury.govU

 202-927-8941 

Obtaining Copies of Testimony and Reports 

To obtain copies of testimony and reports, please log on to our website at Uwww.sigtarp.govU.