Every week, we take stock of how the week unfolded for the stories we’re tracking in Scandal Watch (see the right sidebar). Here is how we do it.  And, as always, feel free to suggest new scandals.

1. Market Crisis

The Treasury Department announced today that it will boost its stake in Citigroup from 8 percent to 36 percent, and AIG is reportedly next in line to rework its bailout (yet again). This time, the deal may include a backstop on further losses from AIG’s credit default swaps. Another possibility is that the insurance giant will split up “into at least three government-controlled divisions,” according to the Financial Times. AIG’s prospects for a quick recovery dimmed this week as attempts to sell off various subsidiaries floundered. Complicating matters is a tax issue with Alico, one of AIG’s “crown jewels,” which the company didn’t disclose to potential buyers, ProPublica reported last Friday.

Meanwhile, Northern Trust’s $1.5 billion in bailout funds attracted attention this week after the Web site TMZ.com reported that the company spent millions of dollars to host a “series of lavish parties and concerts” in Los Angeles last week as part of its sponsorship of a golf tournament. Eighteen members of the House Financial Services Committee quickly demanded that the bank repay the government what it had “frittered away on these lavish events,” but the bank defended the events as a valid marketing strategy.

2. Stanford’s Swindle

Federal prosecutors made their first arrest in the Stanford case yesterday, accusing chief investment officer Laura Pendergest-Holt of misleading SEC investigators, reports the Wall Street Journal.

Meanwhile, the spotlight remains on R. Allen Stanford’s shady business practices, which two former employees say raised numerous red flags. His businesses had attracted a fair share of attention from federal authorities over the years, culminating in the SEC’s accusations of “massive” fraud last week. Adding to his troubles, Stanford is facing a $104 million tax lien filed against him and his estranged wife by the IRS last August, the Miami Herald reported.

As lawmakers race to dump their contributions from Stanford (well, most of them), stubborn Washington-Stanford ties keep popping up. Relatives of Vice President Joe Biden ran a $50 million fund that was marketed exclusively by Stanford-controlled companies, reports the Wall Street Journal. And TPMMuckraker notes that Stanford used an “obscure” nonprofit, the Inter-American Economic Council, to curry favor with lawmakers and push for looser restrictions on offshore banking. One beneficiary of Stanford and IAEC’s generosity was former Rep. Bob Ney, who showed some love for Stanford in the Congressional Record.

3. Burris’ Backtracking

Sen. Roland Burris (D-IL) is facing an onslaught of pressure to resign these days, including from Illinois Gov. Pat Quinn, who asked state legislators to approve a special election for Burris’ seat if he doesn’t resign in the next two weeks. Burris is in hot water for not fully disclosing contacts he had with allies of former Gov. Rod Blagojevich. And that water got a little hotter yesterday when the Chicago Sun-Times reported that Blagojevich gave Burris’ son a $75,000-a-year job at a state housing agency five months ago, even though the son was facing a foreclosure suit and a $34,163 tax lien.