The head of US President George W Bush's new corporate-crime task force served as a director at a credit-card company that paid more than $400 million to settle allegations of unfair and deceptive business practices.
Official sources said Deputy Attorney General Larry Thompson was unaware of problems at Providian Financial until they were unearthed by US regulators, and he then played a lead role in pushing the company to recompense consumers.
Mr Thompson chaired the Providian board's audit and compliance committee until he took up his Justice Department post in May 2001. The previous year, the San Francisco-based company, under pressure from federal and state regulators, agreed to pay a total of $405 million to customers it allegedly bilked through hidden charges and deceptive sales practices.
"As an outside director of Providian, he only became aware of the problems when the regulators began to make inquiries," Justice Department spokesman Mr Mark Corallo told Reuters. "And as soon as he was aware of the issues, he personally took the lead in making the company do the right thing."
The White House has likened the task force headed by Mr Thompson to a SWAT team.
A recent slew of financial scandals in the United States has hurt investor confidence in publicly traded stocks and rocked markets around the world.
The scandals also threaten to become a political liability for President George W Bush as Democrats try to turn the issue against him and his fellow Republicans ahead of November's high-stakes congressional elections.
Bush himself has been criticized for taking a low-interest loan more than a decade ago from an oil company where he served as a director. And a legal watchdog group on Wednesday sued Vice President Dick Cheney and the oil services company he once ran, Halliburton, alleging they overstated revenues.
The Washington Posttoday reported that Mr Thompson sold nearly $5 million worth of Providian stock, his entire holding, when he entered the Bush administration to comply with federal ethics rules.
A few months later, warnings of mounting defaults in its portfolio of credit-card loans to less-credit-worthy borrowers started the company's stock on a long downward slide from around $60 a share to less than $5 a share currently.
Mr Corallo said Thompson never sold a single share of the company's stock in the time he served on its board.