RTC staff impeded, 3 testify Lawyers says bosses undercut S&L cases

August 12, 1992|By New York Times News Service Knight-Ridder News Service contributed to this article.

WASHINGTON -- Government lawyers told a Senate panel yesterday that federal attempts to sue and recover money from former officials of defunct savings and loan associations had been mismanaged and relaxed in recent months. They suggested that political influence played a role in weakened government efforts.

A lawyer with Resolution Trust Corp., the agency responsible for cleaning up collapsed savings and loan institutions, said the agency dropped plans to sue officials of an institution around the time one of them visited with President Bush. The lawyer, Jacqueline P. Taylor, criticized the decision to resolve the matter out of court rather than to file a lawsuit as "an inappropriate settlement because of political reasons."

The panel, the Senate Banking, Housing and Urban Affairs Committee, also heard Ms. Taylor, two other agency lawyers and a top official of the General Accounting Office, a congressional investigative body, tell about organizational disruptions in the Resolution Trust Corp.

Any reduction in recoveries by the government from accused savings and loan wrongdoers would increase the bailout's total cost to taxpayers, now estimated at more than $200 billion.

Albert V. Casey, president of the Resolution Trust Corp., defended his agency's efforts, including a recent restructuring. He repeated his commitment that the RTC would "vigorously and effectively pursue its claims against those whose wrongdoing caused losses to the American public in connection with the widespread failures in the savings and loan industry."

However, Ms. Taylor said that in one instance she was ordered to settle for $30,000 a case the evidence showed the RTC could have won or settled for "multi- , multimillions of dollars." The possibility of prejudicing pending cases prevented her from citing any by name.

"I was told I was on shaky political ground," Ms. Taylor said in describing the pressure she received to back off the matter.

Mr. Casey did not comment on the testimony of Ms. Taylor or the other attorneys but promised the committee a reply this month.

He also acknowledged that the reorganization of the legal program involved some mistakes but denied that the mistakes had been caused by any desire to prevent aggressive investigations.

At the hearing, the committee made public an RTC personnel policy implemented earlier this year that, in effect, set up special hiring preferences for well-connected attorneys seeking jobs at the corporation. Sen. Timothy E. Wirth, D-Colo., criticized that policy, saying it suggested improper political influence.

Mr. Casey, who responded that he would "take it out of effect" immediately, said that yesterday's hearing was the first time the policy had been brought to his attention.

In pursuing those responsible for savings and loan failures, Mr. Casey said, the agency must find wrongdoing as well as determine that it is economically efficient to bring a case. About one-third of all failures lead to cases, he said.

He added that recent changes in the legal program were part of an effort to streamline the RTC as it moved toward completion of its business next year.

But the lawyers, supported by the Senate committee's chairman, Sen. Donald W. Riegle, D-Mich., said the most experienced lawyers were being replaced or punished, allowing potential defendants off the hook. Two other agency attorneys who told the panel yesterday that there had been mismanagement in the legal program, Bruce Pederson and Bradley Smolkin, were recently reassigned and demoted from their positions as managers.

The three lawyers also criticized a draft memorandum prepared last month as part of a Bush administration review of proposed government guidelines for suing officers and directors of banks and savings and loans. The guidelines, the lawyers said, would make it harder to sue directors who were not full-time employees of an institution.

Mr. Casey, in a letter earlier this month to Mr. Riegle that was released at yesterday's hearing, said he had expressed concerns to other regulators that "issuing guidelines would not be advisable, because some defendants might attempt to use such a statement for defensive purposes."

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