Martin F. Connor, president of the American Tort Reform Association, is leading a fight against the professional-liability lawsuits that he says cost the country $17.8 billion a year.

That pits Mr. Connor, 63, a former Washington counsel for General Electric Co., against federal bank and thrift regulators, who are using lawsuits against lawyers and accountants as an enforcement weapon.

According to a study commissioned by the tort reform group, litigation against law firms, accountants, and investment bankers will:

* Cost the nation 224,000 jobs a year between 1992 and 1996.

* Increase the federal budget deficit by an average of $3.7 billion a year.

* Slice state and local government surpluses to the tune of $1.2 billion a year.

* Reduce real output in manufacturing by $6.9 billion a year.

"There is a serious public policy question whether this litigation makes sense," Mr. Connor said during an interview in his Washington office.

He said professional firms are being unfairly blamed for bank and thrift failures becuase they have deep pockets.

Regulators haven't stopped to think about the consequences of "scapegoat litigation," Mr. Connor said. "If the Big Six [accounting firms] go, who's going to audit General Motors? Or the FBI?"

The association has 400 members and represents groups that include the American Institute of Certified Public Accountants, the Boy Scouts of America, and the American Medical Association - and no lawyers' groups. Its stated goal is to ensure that the public is treated fairly in the legal system.

"We are representing a public interest," Mr. Connor said.

Chilly Response from Regulators

Of course, the regulators dismiss his study.

"It's a useless piece of paper," snapped Harris Weinstein, chief counsel at the Office of Thrift Supervision. "It suffers from significant flaws in methodology. I'd like to find out what the authors think is meritorious."

"It's very popular to argue against bringing actions against professionals by claiming it will hurt blue-collar workers in the manufacturing sector," added Stephen Katsanos, a spokesman for the Resolution Trust Corp. "That is politically correct' today."

Mr. Connor commissioned the study in June after Mr. Weinstein and the OTS filed a $275 million action against the New York law firm of Kaye, Scholer, Fierman, Hayes & Handler for work the firm did for Lincoln Savings and Loan Assocation of Irvine, Calif.

Motivation for Study

The OTS struck again a few weeks later with a suit against James S. Fleischer, a thrift lawyer with Silver, Freedman & Taft. He consented to pay $600,000 in restitution for rendering an unqualified legal opinion in 1985 for Lincoln, the failed thrift associated with Charles H. Keating Jr.

"I was appalled at the measure of damages applied in those cases," Mr. Connor said. "Nobody seemed to me to be paying attention to the costs."

The association executive got in touch with several research firms and settled on AUS Consultants of West Conshohocken, Pa., to conduct a study.

The study assumes that scapegoat litigation will increase and that the rise will push up the cost of malpractice insurance, causing professionals to raise fees and conduct much more thorough and costly reviews to protect themselves.

The clients, it is assumed, will pass the costs on to their customers. The study alson came up with a likely increase in the cost of capital.

The assumptions regarding increased investment costs and inflation rates between 1992 and 1996 were plugged into the Long-Term Interindustry Forecasting Tool model at the University of Maryland.

"The analysis is sound, based on the assumptions we made," said John Urbanchuk, vice president with AUS. "If anything, the numbers are conservative."

Qualified Support

Professionals think it's about time somebody came to their defense. But some are leery about Mr. Connor's fingdings.

"I agree with the general conclusion," said Keith R. Fisher, chairman of the American Bar Association's task force on the liability of counsel representing depository institutions. "But for the life of me, I don't really see how they get there," Mr. Fisher added.

"I don't profess this study is the ultimate in economic analysis," Mr. Connor said. "But it is an honest, objective effort. If people don't like it, they can do their own."

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