September 22, 2010 7:45 PM

Cadwalader Declines to Testify Before Congressional Oversight Panel

Posted by Brian Baxter

A Congressional Oversight Panel spent the day Wednesday looking into the use of private contractors by the Treasury Department for work related to the Troubled Asset Relief Program (TARP). But not all the invited guests showed up.

Lawyers from Cadwalader, Wickersham & Taft, who had been asked to appear before the COP, ultimately did not participate in the proceedings, according to statement made early Wednesday by one panel member presiding over the hearing. At the start of the hearing, COP member Damon Silvers, a director of policy and special counsel for the AFL-CIO, announced:

"I would like to note that we also invited testimony for the next panel from a representative of Cadwalader, Wickersham & Taft LLP, whom Treasury contracted with for many of its most significant legal dealings in the automotive industry, the public-private investment program, and other aspects of TARP. Treasury declined to allow Cadwalader to testify, as Cadwalader's client, objecting to any appearance of Treasury's attorneys in public hearings in other than extraordinary circumstances, but agreed to make the firm available to the panel for a private meeting."

"We disagree with Treasury's decision to object to their counsel testifying. We note the obstacle such an approach places to public oversight of legal contracting in the context of the TARP. The panel has requested a comprehensive list of Cadwalader clients that have received TARP funds from both Cadwalader and the Treasury Department. We have yet to receive that list, but we note that Cadwalader's Web site and other public sources list a significant number of current and former TARP recipients as clients of the firm, including Bank of America, Citigroup, and AIG. We will be noting the results of this request and our meeting with Cadwalader as part of our October report."

(Click here for video of the hearing and here for a statement from Treasury.)

Treasury and Cadwalader cited attorney-client privilege as the reason behind the firm's reluctance to go before the COP. Sources familiar with the matter tell The Am Law Daily that Cadwalader initially received a letter from the COP asking the firm to testify. The request was forwarded to Treasury, the firm's client. Both parties wanted to cooperate with the panel, sources tell us, but in a manner that would not compromise attorney-client privilege.

Cadwalader and Treasury ultimately decided against testifying. The decision was relayed to the COP in a letter from Cadwalader litigation cochair Louis Solomon, say those familiar with the situation. The letter broached the idea of a private meeting next Tuesday with COP personnel, as well as the possibility of Cadwalader turning over its client information to Treasury, which would in turn provide the file to the COP. (Cadwalader clients that have received TARP funds include Bank of America/Merrill Lynch, Citigroup, and American International Group.)

In his statement, Silvers said that "the bulk of TARP's contracting dollars have been spent on law firms, investment management firms, and audit firms. The nature of these firms' relationship to the financial system gives rise inevitably to a wide range of potential conflict issues."

The Am Law Daily has reported on potential conflicts arising from situations where law firms handle bailout work while continuing to advise corporate banking clients. For the most part, Treasury has rejected this notion as long as the firms themselves don't take an adverse role to the government. Congress authorized TARP, which is scheduled to expire on October 3, as an economic rescue plan enacted under the Economic Emergency Stabilization Act of 2008.

Certain types of TARP work that would otherwise be handled by federal employees--such as Cadwalader's representation of Treasury on its auto bailout initiatives--were contracted out to private firms. Bailout Sleuth, reporting on Cadwalader's absence from Wednesday's hearing, notes that the total value of the firm's TARP contracts is $27.5 million. As previously noted by sibling publication The National Law Journal, Cadwalader slashed its rates for such work. (Click here and here for copies of Cadwalader TARP contracts.)

Former COP chair Elizabeth Warren recently resigned from the panel to oversee the establishment of a new consumer protection bureau for the Obama administration. Warren was once a summer associate at Cadwalader.

The COP's remaining members include Silvers, former Citicorp general counsel Richard Neiman, economist Kenneth Troske, and former Patton Boggs, Fulbright & Jaworski, and Hughes & Luce tax partner J. Mark McWatters. (Neiman did not attend Wednesday's hearing because of urgent matters related to his current position as Superintendent of Banks for the State of New York.)

Among those who did testify at Wednesday's hearing were Scott Amey, general counsel for the Project on Government Oversight, and George Washington University School of Law professor Steven Schooner.

Cadwalader's chairman, W. Christopher White, is the brother-in-law of Treasury's former auto bailout czar Steven Rattner. Cadwalader has in the past said their relationship had nothing to do with firm landing the Treasury contract, which was competitively bid, according to records compiled by the Federal Procurement Data System.

White replaced Cadwalader's longtime head Robert Link, Jr., as chairman in February 2008. The New York Law Journal, a sibling publication, reported this week that Link quietly retired over the summer.

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