One of the law firms hired to provide legal work for the Treasury Department on a multibillion-dollar federal loan program also lobbied Congress for a private client pushing to expand the same government initiative, records show.
The Treasury Department retained Sonnenschein, Nath & Rosenthal LLP more than a year ago to provide legal advice on the Federal Reserve’s Term Asset-Backed Securities Loan Facility (TALF), a program aimed at boosting lending to small businesses and consumers.
While advising the government on TALF last year, the law firm also lobbied Congress for the Recreational Vehicle Industry Association (RVIA), an industry group seeking to expand TALF to include recreational vehicle loans.
“Clearly, this could pose a conflict of interest and this is something Treasury should have been fully informed about,” said Craig Holman, legislative representative for Public Citizen, which monitors lobbying activities in Congress.
A spokesman for Sonnenschein said the law firm’s work for Treasury and the trade group never overlapped.
“With respect to our work for the RVIA regarding TALF, as disclosed in public filings, our representational activities were directed exclusively before Congress,” law firm spokesman Jeffrey Mutterperl said. “We are extremely vigilant in meeting our professional obligations to all of our clients.”
Treasury said its officials did not know about the firm’s lobbying work.
“Sonnenschein did not notify Treasury about its work on behalf of the RVIA,” spokesman Andrew Williams said when first contacted last year about the arrangement. In addition, Mr. Williams said, Treasury officials met with the firm “to discuss the issue and our expectations regarding notification of actual or potential conflicts of interest.”
On Wednesday, Mr. Williams added: “Our discussions with Sonnenschein led to a close dialogue between the Office of Financial Stability and Sonnenschein regarding the work it performs for other clients. That dialogue has been beneficial to ensuring our strict conflict of interest guidelines are effectively implemented.”
Though Treasury officials said they didn’t know about the work, the lobbying arrangement was no secret. Sonnenschein has been lobbying for the trade group for more than two years, according to public filings.
From April through June last year, the firm received $80,000 from the recreational vehicle group to lobby the House and Senate on “issues related to RV financing,” including TALF, according to a Senate lobbying disclosure.
Since 2007, the firm has received more than $600,000 in fees from the trade group for lobbying on several issues important to the RV industry, the filings show.
The trade group declined to comment when contacted about Sonnenscheins lobbying work. While Sonnenschein has said the firm never lobbied the Treasury Department on TALF, the trade group reached out to Treasury officials, according to a January 2008 press release on the trade groups Web site that states:
“RVIA is now having direct discussions with the Treasury Department and the Federal Reserve asking them to include RV dealer floor plan and consumer loans in the list of securities they will purchase as part of an asset-backed term loan facility (TALF).”
Sonnenscheins TALF-related legal work on behalf of Treasury was disclosed in a December 2008 report to Congress by the Financial Stability Oversight Board. The report noted that during the last quarter of 2008, Treasury had “hired a number of legal advisers to assist Treasury with the significant volume of legal and transactional work under the TARP.”
The report said Sonnenschein was retained to provide legal assistance involving both TALF and auto loans in the Troubled Asset Relief Program (TARP).
According to a federal contracting database, the government has awarded more than $3 million to the firm in connection with its legal work on both TALF and auto-loan programs.
Overall, Treasury officials have hired more than 60 outside contractors and financial agents to help administer TARP, ranging from law firms such as Sonnenschein to companies that provide parking and office machines, records show.
Neil Barofsky, the special inspector general charged with monitoring the TARP program, warned Congress in a report issued in the fall about potential conflicts of interest involving TARP.
“TARP-related conflicts of interest can arise under various circumstances, such as when retained entities … perform similar work for Treasury and other clients,” Mr. Barofsky said in the report. “In these situations, retained entities may find that their duty to clients may impair their objectivity when advising Treasury or may affect their ability about the proper use of nonpublic information.”
The report said Treasury had issued conflict of interest rules, but some say more ought to be done to ward off even the appearance of a conflict of interest for the companies that the department hires for TARP work.
Daniel Schuman, who as policy counsel for the nonpartisan Sunlight Foundation has written about TARP lobbying rules, said even though Sonnenschein said it never lobbied Treasury, its lobbying of Congress on TALF-related issues could create the appearance of a conflict of interest.
“Theyre making a distinction, treating the executive and legislative branches as two different entities, but ultimately its all the federal government,” he said.