WASHINGTON -- The House Banking Committee is launching an investigation of the professional-liability settlements into which the Resolution Trust Corp. and Federal Deposit Insurance Corp. are entering. Rep. Henry Gonzalez, chairman of the committee, said he wants to ensure that the two agencies' legal divisions get the maximum recovery of financial damages.
Rep. Gonzalez repeated complaints about a $400 million RTC settlement of professional liability suits in 1992 against Ernst & Young, an accounting firm that audited 36 failed savings and loans.
Clause Barred Further Suits
The Texas Democrat said the agreement contained an indemnification clause barring the government from suing the firm for any further wrongdoing found in the 36 institutions covered by the accord. He said professional liability investigations are still pending at 28 of those thrifts.
"The Ernst & Young deal calls into question the settlement strategies used by the RTC and FDIC to pursue professional advisers," Rep. Gonzalez said. "We must shine some light on these agreements to ensure they are in the best interest of the taxpayers."
He requested complete details from agency heads on professional liability cases involving Ernst & Young; Drexel Burnham Lambert and its former officials Frederick Joseph and Michael Milken; and two law firms -- Jones, Day, Reavis & Pogue nd Kaye, Scholer, Fierman, Hays & Handler.