Democrats Accuse Bush Officials on S&L; Mess : Thrifts: Several senators charge conflicts of interest in the Administration’s handling of the burgeoning fiasco.

Senate Banking Committee Democrats accused Bush Administration officials Thursday of harboring “conflicts of interest” in their management of the escalating savings and loan crisis.

Waving copies of a five-year-old lawsuit unearthed by committee staff members, Sen. Timothy Wirth (D-Colo.) asked the official in charge of the S&L; cleanup why his agency hired a San Diego accounting firm once sued for negligence in the collapse of San Marino Savings & Loan.

According to Wirth, the accounting firm was retained as a contractor by Resolution Trust Corp. to help investigate a series of rushed takeovers of failed thrifts in late 1988 that will cost taxpayers an estimated $69 billion.

In a separate accusation, Sen. Robert Kerry (D-Neb.) cited previous reports that a top RTC official was “a good friend” of a Washington lobbyist who represented one of the biggest beneficiaries of the controversial 1988 deals.

Kerry, hinting that “insiders” and “sweet deals” were involved in the 1988 takeovers, demanded to know why RTC Executive Director David C. Cooke had met with the lobbyist, Robert J. Thompson, “within six days” of enactment of the S&L; bailout legislation.

Responding to the pointed questioning, RTC Chairman L. William Seidman bluntly dismissed as “baloney” the assertion that his executive director had a close relationship with the thrift buyer who was represented by Thompson.

“Of course I knew about the meeting between Cooke and Thompson,” Seidman snapped. “I asked him to meet with them when they (the buyer group) purchased the banks.”

Seidman said he could not address in detail Wirth’s disclosure that the San Diego accounting firm, McGladrey & Pullen, had once been sued by the government in connection with its audits of the failed San Marino thrift.

McGladrey & Pullen was one of six firms hired by Seidman’s agencies as contractors to help investigate the 1988 deals, which were arranged by regulators in an effort to place a number of troubled thrifts into the hands of new owners.

According to the committee disclosures, McGladrey & Pullen was sued in 1985 by San Marino Savings shareholders and the now-defunct Federal Savings & Loan Deposit Insurance Corp., which had taken over the failed thrift in late 1984. Other parties, including the former officers and directors of the thrift, also were sued.

The lawsuit against McGladrey & Pullen accused the accounting firm of negligence in connection with reports it had issued on the state of San Marino’s assets in 1982. Those reports turned out to be inaccurate, the committee information indicates.

The suit eventually was settled for an undisclosed amount. A source close to the case said the aggregate settlement from all defendants was “upwards of $20 million,” but he declined to say how much of that sum was paid by McGladrey.

William Roelle, director of RTC’s resolutions and operations division, told the Banking Committee that the suit had been settled for a “small” amount and that the RTC general counsel concluded that the issue was of little significance and not worth pursuing.

Seidman promised to look into the matter and report back to the committee.

The RTC chairman said a report examining the 1988 deals is being prepared by the agency and should be presented to Congress in November. He said any evidence of fraud or wrongdoing in the deals could allow the government to rescind improper contracts. But he cautioned that untainted contracts, however costly in hindsight, could not legally be undone.

Wirth, meanwhile, demanded that the Bush Administration promptly make a formal request for RTC funding for the next fiscal year. In House testimony earlier this week, Seidman said the agency’s working capital has dwindled to $13 billion and warned that S&L; takeover operations would stop if another $60 billion in working capital is not made available for fiscal 1991.

Including operating expenses, the agency will need $100 billion during the fiscal year that begins Oct. 1, said Seidman, adding that a formal RTC operating plan for next year was forwarded to the Treasury Department “about two weeks ago.”

“We’ve heard nothing from Treasury,” complained Wirth. “I am astonished we haven’t received a request for $100 billion from Treasury. Are they waiting for the budget negotiations to be over? Are they trying to put responsibility on Congress if RTC has to close down? They are the Administration. They were elected and have the responsibility to do this and not try to waffle out of it.”

“We should have a formal request,” Banking Committee Chairman Donald W. Riegle Jr. (D-Mich.) said. He noted, however, that appropriate committees in both houses already know how much Seidman thinks he needs to keep RTC going.