Issues NCUA's Inspector General Needs to Examine in the Hiring of Law Firms

In a recent blog post, I reported that Representative Issa requested that NCUA's Inspector General review if NCUA must comply with an executive order signed by President George W. Bush in 2007, titled "Protecting American Taxpayers from Payment of Contingency Fees." The executive order prohibits federal agencies from entering into contingency arrangements with outside law firms.

NCUA last year hired two law firms under a contingency arrangement associated with lawsuits filed against investment banks over mortgage-backed securities sold to failed corporate credit unions.

As the Inspector General conducts its review, there are several issues it should explore beyond whether the agency is subject to the 2007 executive order and whether this was the best option for the agency.

First, the Inspector General needs to review whether the bids were subjected to competitive open bidding process. It is unclear from the Wall Street Journal story whether the bidding process was open. John Ianno, the NCUA's associate general counsel, told the Wall Street Journal that he was not aware if the agency interviewed any other law firms for this work.

Second, the Wall Street Journal story noted that then-general counsel Robert Fenner, who entered into the contracts with the two law firms, worked with Mr. Frederick of Kellogg Huber at the Justice Department. Kellogg Huber was one of the two law firms selected. Did Fenner's connection with Frederick influence the awarding of the bid?

The Inspector General should disclose what factors led to the selection of the two law firms, especially Kellogg Huber.