Federal Watchdogs to Police Selloff of Thrifts : S&Ls;: Regulators will hire 20 to 30 ‘contractor cops.’ They fear kickbacks, rigged bids and other abuses occurring.

The Resolution Trust Corp. plans to hire a special group of employees to watch for possible corruption as it sells hundreds of failed savings and loans, an agency spokeswoman said Friday.

The RTC hopes to set up a team of 20 to 30 “contractor cops” this fall, spokeswoman Kate Spears said. The team, which will oversee the sale of billions of dollars of S&L; assets, will be led by a new assistant director of the RTC to be named in the near future.

“We’re going to be hiring people to work nationwide,” Spears said.

Regulators are haunted by the specter of S&L; fraud, since abuse by some thrift operators was partly responsible for the collapse of hundreds of institutions in recent years. It will cost U.S. taxpayers an estimated $500 billion to pay for the bailout of the federally insured thrifts.

In June, after weeks of criticism by Democrats, President Bush announced with great fanfare that he was doubling government spending on investigating and prosecuting S&L; fraud. Bush established “rapid response teams” of investigative lawyers and accountants to be directed by a Justice Department official.

“We need to put those people in jail and call them to account for their conduct,” the official, James G. Richmond, said in a recent interview. Richmond, formerly the U.S. attorney for northern Indiana, was appointed to the new position of special counsel for financial institution fraud.

In addition to fraud by S&L; insiders, regulators also are sensitive about allegations of abuse stemming from their own efforts to clean up the mess. Democrats in Congress have accused the regulators of making sweetheart deals with outside buyers of failed thrifts.

In a highly publicized case, Congress has been investigating investor James Fail for his purchase of 15 insolvent Texas S&Ls;, now known as Bluebonnet Savings Bank, with $70 million in borrowed money and only $1,000 in personal funds.

To help prevent future abuses, the RTC’s new contractor cops will coordinate their efforts with the agency’s inspector general, John Adair, Spears said.

“It looks to us like the opportunities for fraud are going to be enormous,” Adair told the Washington Post. He was not immediately available for comment Friday, RTC spokesmen said.

The new RTC team will keep an eye on the various contractors hired by the agency to sell thrift assets and manage them until they are sold. The new watchdogs will watch for kickbacks, rigged bids and other forms of fraud involving the assets repossessed by failed S&Ls;, which range from office buildings, hotels and condominium developments to car washes and golf courses.

Since the S&L; bailout bill became law a year ago, the RTC has taken over 475 ailing institutions.

The Office of Thrift Supervision, an agency of the Treasury Department, said Thursday that at least 246 additional S&Ls; are expected to fail and are likely candidates to be taken over by the RTC.