Barofsky, Watchdog to Government Bank Bailout Program, Joins Law Firm

Neil Barofsky, the former prosecutor who brought transparency and accountability to the federal government’s 2008 bank bailout program as its first special inspector general, has joined Jenner & Block, a law firm based in Chicago, as a partner.

Neil Barofsky said his job at Jenner & Block was a chance to “have a truth-seeking role.”

Mr. Barofsky, who was appointed by President Obama to oversee the $700 billion Troubled Asset Relief Program in late 2008, was a Washington outsider whose periodic reports on the program questioned Treasury officials’ claims of its effectiveness. He and his office drew criticism at times from those officials, as a result.

Mr. Barofsky left his post in 2011 to teach at New York University’s law school. He also wrote “Bailout,” a scathing account of his time in Washington that highlighted the problem of regulators who he said were for the most part captured by the institutions they were supposed to police.

In an interview, Mr. Barofsky said that joining Jenner & Block was a natural next step because the firm specialized in helping government agencies and major corporations with in-depth investigations of problematic practices. Such investigations, he said, are similar to the work he did at TARP. In addition, unlike many other large law firms, Jenner & Block represents clients bringing suits against large financial institutions.

“I can bring my experience investigating large financial institutions and complex financial transactions to a place that doesn’t just do defense work in this area,” Mr. Barofsky said. “This is an opportunity in private practice to help improve governance and have a truth-seeking role.”

In Mr. Barofsky’s tenure of a little over two years, the inspector general reports tracked fraud in the program and recommended how the government could protect taxpayers from losses. The reports also underscored Treasury’s lackluster efforts to help distressed homeowners and shed light on bailout specifics that the government did not seem eager to publicize.

A report on the $182 billion bailout of the American International Group, for example, was especially illuminating in describing the failure by the Federal Reserve Board to wrest concessions from the giant insurer’s trading partners on what they were owed by the company. As a result, these trading partners, which included foreign banks and United States investment banks, were repaid in full in the rescue, far more than they would have received had the insurer failed. The report irked government officials by calling the deal a “backdoor bailout” for the major banks on the other side of A.I.G.’s trades.

Mr. Barofsky’s eight years as a prosecutor in the Southern District of New York made him well suited to tackling the mortgage crisis and other financial malfeasance related to TARP. During his time as a prosecutor in New York, he headed the office’s mortgage fraud group and oversaw the Refco case, involving the collapse of a major commodities firm. Overseeing TARP in Washington, his office won convictions in significant mortgage fraud cases and investigated various improprieties growing out of the financial crisis, an approach others in Washington were more hesitant to take.

By joining a firm that takes on big banks, Mr. Barofsky appears to be taking a different tack from other regulators or top law enforcement officials who join firms that defend the same institutions they previously oversaw or policed. For example, in July, Robert Khuzami, the former director of enforcement for the Securities and Exchange Commission, joined Kirkland & Ellis, one of the nation’s biggest corporate law firms.

Jenner & Block, a firm founded in 1914 with offices in Los Angeles, New York and Washington, is perhaps best known for its report on the Lehman Brothers bankruptcy five years ago. In January 2009, Anton R. Valukas, the firm’s chairman, was appointed examiner in the bankruptcy by James M. Peck, the judge overseeing the case. Asked to investigate the causes of Lehman’s collapse, Mr. Valukas and his colleagues published a 2,200-page report just over a year later that was filled with revelations about the company’s questionable practices. The details disclosed in the report were the subject of Congressional hearings; Judge Peck called it “the most outstanding piece of work product ever produced by an examiner.”

Other notable cases handled by Jenner & Block include its representation of the bankruptcy trustee in the matter involving Sentinel Management Group, a cash management firm that froze customers’ redemptions and collapsed in 2007 with $100 million in liabilities. Jenner & Block sued Sentinel’s insiders and received a court order freezing most of their assets. The law firm has also sued the Bank of New York in the case, seeking more than $500 million in damages for aiding and abetting fraud by Sentinel executives.

Jenner & Block also won a record $431 million arbitration award in 2009 after suing Credit Suisse on behalf of STMicroelectronics, Europe’s largest chip maker and a client of the bank. Credit Suisse had promised to invest the chip maker’s money in safe securities but instead placed the company in far riskier instruments, STMicroelectronics contended. The arbitration panel agreed, but Credit Suisse contested the award in both the district court and the appeals court. Jenner & Block prevailed in both instances.

In an interview last week, Mr. Valukas said Mr. Barofsky would bring many skills to his new position. “He is a person of absolute integrity, which in this day and age is important,” Mr. Valukas said. “He is a skilled and accomplished trial lawyer and in terms of understanding the landscape in New York and Washington, he has enormous expertise for a number of our clients.”

Neither Mr. Barofsky nor the firm would disclose his compensation. But a person briefed on the negotiations said the annual figure was far less than the $5 million a year that Mr. Khuzami reportedly received when he left the S.E.C. for Kirkland & Ellis.

“Looking back on the financial crisis, one area where you’ve seen some degree of accountability is in civil litigation,” Mr. Barofsky said. “Jenner has helped bring transparency to some of the darkest corners of Wall Street.”

A version of this article appears in print on September 9, 2013, on page B3 of the New York edition with the headline: Barofsky, Watchdog to Government Bank Bailout Program, Joins Law Firm.