CLARIFICATION: Only a portion of the $6.5 million that financial adviser Gordon Grigg is accused of bilking from clients came from allegedly using TARP funds as a lure.

TEXT OF STORY

Renita Jablonski: Looks like Bernie Madoff has some competition. Today there’s a court hearing on the first fraud case being linked to the Troubled Asset Relief Program, or TARP. The Securities and Exchange Commission says an investment adviser in Nashville, Tenn., bilked clients out of $6.5 million by using TARP as an enticement. Ashley Milne-Tyte explains.

Ashley Milne-Tyte: Financial adviser Gordon Grigg allegedly told clients he could invest their funds in debt guaranteed by the Troubled Asset Relief Program. In fact, no investment program exists that involves the TARP.

Chris Brummer teaches law at Vanderbilt University in Nashville:

Chris Brummer: To the extent to which the government has been ineffective at communicating the function of the TARP to the U.S. public, you’re always going to have opportunities for people to take advantage of this lack of information about the TARP.

By trying to hoodwink the investing public. He says Grigg wanted to lure clients with the idea that anything government-related meant a sound investment. He says with the public desperate to put their money somewhere safe, other financial fraudsters could also use the government as a marketing tool.

In New York, I’m Ashley Milne-Tyte for Marketplace.