WASHINGTON -- Citing testimony on Tuesday from Resolution Trust Corp. staff lawyers, Senate Democrats charged the thrift-bailout agency with political favoritism and neglect of its enforcement responsibilities.
The lawyers had testified that the RTC legal division had succumbed to political pressure in reaching settlements. Also, they said, a recent reorganization was apparently intended to drive them from the agency just as some cases were at critical junctures.
Sen. Donald Riegle, D-Mich., chairman of the committee, said the testimony suggested a "multifront effort" by the Bush administration to prevent "people who cost so much money" in the thrift crisis from being held accountable.
High Political Profiles
At least two of three RTC lawyers at the hearing said they had been working on cases involving politically prominent people.
The charges extended to RTC personnel policies when Sen. Tim Wirth, D-Colo., produced a memorandum indicating that politically connected lawyers would receive preferential hiring treatment. RTC Chairman Albert Casey said he would immediately rescind the memo, which was issued by RTC General Counsel Gerald L. Jacobs.
"The concern here is that there is a feeling on the part of some professionals that they are being pushed out," while politically connected people "are being pushed in," said Sen. Riegle.
Republican senators stayed away from the hearing. A GOP aide said members essentially felt that Sen. Riegle and the Democrats turned it into a politically motivated spectacle.
'Thank You' Notes
The memo did not say that "specially referred applicants" should be given preference over others, but it did outline steps to be taken in dealing with them, including the mailing of "thank you" letters to the person who made the referral.
Jacqueline Taylor, a lawyer in the RTC's Denver office, said she had been pressured to accept a $30,000 settlement in a case involving an individual who had earned $200,000 a year at a thrift whose failure cost the government tens of millions of dollars.
When she rejected it, she said superiors told her that she was "on politically shaky ground."
Moreover, Ms. Taylor said that after a visit to Denver by President Bush, "cases that were supposed to be filed were not filed."
Ms. Taylor did not offer any direct evidence for her charge, but said "people who were visited by the President had something to do with the case."
"At risk are claims worth billions of dollars," added Bruce Pederson, a lawyer in the RTC's Denver office.
Charges Denied
RTC spokesman Stephen Katsanos said such charges lacked merit. He said the lawyers who testified on Tuesday had not complained about agency policies until they were reassigned.
"If they felt so strongly about it, why didn't they file a complaint with the Justice Department or the Inspector General?" he asked.
Meanwhile, a House Banking subcommittee stepped up its effort to draft legislation that would make it easier for the government to win restitution from individuals responsible for the failure of insured institutions.
Rep. Frank Annunzio, D-Ill., has sponsored legislation that would force criminals to pay restitution more quickly, require government agencies to coordinate their efforts more closely, and allow private citizens to act as "bounty hunters" to help recoup losses.
"It is time for the robbers to pay back their victims," Rep. Annunzio said at a hearing Tuesday of the subcommittee on financial institutions, which he chairs.
Low Payback Rate
The panel reviewed repayments by convicted criminals in 19 cases of bank fraud last spring, and found that less than 1% of restitutions ordered by the courts had been paid.
In one case, no more than $600 had been collected from a defendant who claimed to have a net worth of $367,000.
The subcommittee criticized federal agencies, including the Department of Justice and Federal Deposit Insurance Corp., for devoting insufficient funds to collection and failing to coordinate their efforts.
Regulators who testified at Tuesday's hearing warmly embraced Rep. Annunzio's plan, saying it would dramatically improve their success rate.
"Convicting bank fraud criminals and seeking criminal restitution represent only half the battle," said Alfred Byrne, the FDIC's general counsel. "Collecting restitution is of equal importance."
