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November 19, 2008 > US prosecutor picked to serve as bailout watchdog

US prosecutor picked to serve as bailout watchdog

By Deb Riechmann and David B. Caruso, Associated Press Writers

WASHINGTON (AP), Nov 14 _ The young prosecutor chosen to monitor the $700 billion financial rescue plan has brought down Colombian drug traffickers, gone after swindling corporate executives and now heads the mortgage fraud unit for the U.S. attorney's office in New York City.

On Friday, President George W. Bush nominated Assistant U.S. Attorney Neil M. Barofsky to become the Treasury Department's special inspector general in charge of auditing and investigating how the federal government spends bailout money. The nomination requires Senate confirmation.

In turning to Barofsky, the president tapped a rising star in a Justice Department office known for its high-profile prosecution of crime on Wall Street.

Barofsky, 38, led the recent prosecution of top executives at Refco Inc., one of the world's largest commodities brokerages, which collapsed in an accounting scandal in 2005. Before that, he was lead prosecutor in a major narcotics trafficking case against dozens of leaders in the Revolutionary Armed Forces of Colombia, a leftist guerrilla group.

He was appointed in July to head a newly created mortgage fraud unit in the U.S. attorney's office for the Southern District of New York. The unit won one of its first victories this week, convicting the owners of a company that had run a fraudulent ``foreclosure rescue'' scheme that preyed on struggling homeowners.

Former U.S. Attorney David N. Kelley, one of Barofsky's old bosses, called him an ``excellent prosecutor'' who has the respect of law enforcement.

Attorney Gary Naftalis, who represented former Refco chief executive Phillip Bennett, called his former legal adversary a ``first-class lawyer'' capable of deciphering the inner workings of huge, troubled corporations.

Bennett pleaded guilty this year to conspiracy and fraud charges and was sentenced to 16 years in prison.

A 1995 graduate of New York University's law school, Barofsky worked in private practice before becoming an assistant U.S. attorney in 2000, joining an office whose alumni include former Mayor Rudy Giuliani.

Barofsky was part of a group of prosecutors who received an award last year for recovering more than $1.2 billion in assets from corporate fraudsters to be used to compensate swindled investors.

In his early years in the office, he also prosecuted a Hong Kong man who tried to fake his death in the Sept. 11, 2001, terror attacks to avoid facing charges in a passport fraud case.

The establishment of a special inspector general dedicated to the rescue program was one of the provisions added to the bailout legislation to secure its passage.

Other provisions intended to boost oversight of the massive program included a special oversight board and regular government audits.

If confirmed by the Senate, Barofsky's appointment would carry over into the next administration, although President-elect Barack Obama would also have the power to replace him.

Barofsky would be required to file a report to Congress within 60 days detailing the ``purchases, obligations, expenditures and revenues'' associated with the bailout plan.

He would not be the only overseer. The law also requires oversight from the Government Accountability Office.

Congress allocated $50 million to run the office.


Caruso reported from New York; Associated Press writer John Dunbar contributed to this report.a

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