Handful of Big Firms Gets Bulk of RTC Contracts : Bailout: Small outfits miss out on lucrative deals. The agency is also doing business with companies it previously barred from bidding.

The federal government’s huge savings and loan rescue effort is providing a gusher of cash for a small group of companies that are capturing the bulk of the contracts for managing the assets seized from failed thrifts, an investigation by The Times shows.

Although the Resolution Trust Corp., which oversees the bailout, has a list of 60,000 companies that are eligible for such contracts, 25 firms have captured more than $568 million in estimated fees--59% of the $961 million in fees for the 23,000 contracts awarded so far.

In fact, nearly 10% of the rapidly growing business has gone to just one large and aggressively expanding bank, NCNB Corp., and two of its wholly owned subsidiaries, which together have contracts worth more than $95 million in estimated fees from the RTC.

Moreover, the RTC is now doing business with a number of accounting firms--including giant Coopers & Lybrand--that it earlier had banned from bidding for such contracts on grounds that the firms had engaged in practices that had contributed to the failures of some thrifts.

The government initially had sought to blacklist five of the six biggest accounting firms on such grounds but apparently decided later that their expertise was too important to bar them from participating in the thrift cleanup.

The concentration of contracts comes two years after the RTC opened for business with a congressional desire to spread the job of disposing of assets from seized savings and loan associations to as many private firms as possible--including small businesses.

Economists say nothing is inherently wrong in channeling the lion’s share of the RTC’s contracts to a small number of firms, and, indeed, the agency itself contends that those firms are the only ones able to do the job on time.

Seizing the failed thrifts and disposing of their assets quickly “is what Congress wanted us to do,” says Stephen Katsanos, the RTC’s spokesman. Katsanos contends that it would have taken too long for the agency to have waited for smaller companies to be certified for contracts.

But the concentration is almost certain to anger some in Congress.

Although the law creating the RTC does not require that any specified portion of the agency’s business go to certain categories of firms, the lawmakers have made clear that they wanted smaller- and medium-size firms to receive an ample share of contracts.

Rep. Jim Leach (R-Iowa), who was made aware of The Times investigation, warned that public confidence in the S&L; rescue effort could be seriously eroded if the agency continues to award large contracts to only a few big firms.

“The public can tolerate someone getting a good deal if they or their neighbors get a good deal,” Leach remarked. “But if the size of the contracts is of a stupendous nature, it implies that only the well-heeled have a shot.”

Rep. Bruce Vento (D-Minn.), chairman of a special House Banking Committee task force on the RTC, expressed similar views. Vento complained that big companies “have a well-worn path to the (RTC’s) front door.”

The statistics were compiled through a massive computer review of RTC records conducted by The Times, which assembled for the first time outside agency files a comprehensive list of the firms contracted to help in the S&L; rescue.

RTC contracts cover a wide variety of services, from hiring real estate brokers and cutting the grass at condominiums to keeping books and records and investigating prospective customers.

The RTC does not require that contractors have special qualifications to become asset managers. Any firm can enter the bidding by registering with the RTC. But in awarding contracts, the agency does rely heavily on the experience a company has had in the field, as well as the amount of the bid.

As a result, agency officials say the low bidder isn’t necessarily always the winner. A competitor with more experience and expertise may get the award. An RTC panel reviews the bids and selects the contractor.

By far the biggest and most potentially most lucrative source of business for a would-be contractor is the category of “asset management”--overseeing and selling the loans and properties the RTC has acquired from its takeover of the 617 failed thrifts.

According to RTC records, asset management contracts will produce $440 million of the nearly $1 billion in fees going to outside firms under current contracts.

The asset managers handle overdue loans as well as property on which loans have been foreclosed. Their jobs may include negotiating with the borrower, changing the terms of the loan or cutting the amount due.

For real estate, it includes hiring subcontractors to manage the buildings, collect the rents, look for new tenants and look for someone to buy the property. That is where most of the small-business awards come in. All subcontractors must be on a list of approved firms.

The asset management jobs can be complex and far-ranging. Because many of the failed S&Ls; had made loans covering properties across a wide area of the country, a contract might involve managing securities and real estate in several states.

RTC records show that the biggest winner of RTC contracts was NCNB Corp., through its subsidiaries, NCNB Texas National Bank and Financial Resource Management Trust Co., which will receive $95 million in estimated fees.

NCNB’s rise as the leader in managing RTC-controlled assets comes as the huge North Carolina-based institution has been rapidly acquiring failed thrifts from the RTC--often with federal aid--in an effort to grow beyond being a “super-regional” bank.

When NCNB acquired failed First RepublicBank Corp. of Dallas in 1988, the federal government provided $1 billion in immediate aid to cover loan losses and agreed to assume all the risks of future losses from delinquent loans--a lucrative deal by any measure.

Emboldened by the First Republic deal, NCNB embarked on an acquisition binge and has acquired 12 failed S&Ls; in Texas and one in Florida from the government, with total assets of $5.1 billion.

Others in the top 10 recipients of RTC funds include J. E. Robert Cos., an Alexandria, Va., firm with $45.2 million in estimated fees; Midland Data Systems, $41.4 million, and IBM, $24.3 million for a computer software system to track real estate assets.

J. E. Robert won the biggest contract--$41.5 million in estimated fees for managing the assets of failed University Savings, which had one of the biggest apartment portfolios in Texas and a vast array of loans and land.

Joseph E. Robert Jr., the firm’s president, says his company will receive a basic management fee of $900,000 a month plus 1.9% of the sales price of any assets that he is able to unload under his three-year contract. He also will be eligible for bonuses for any sales that the firm completes during the first two years of the contract.

Robert has been in the workout business since 1974, specializing in managing and selling distressed properties. He received his first contract from federal thrift regulators in 1983--to manage a mammoth portfolio of $110 million.

The Times study showed that some companies have won lucrative RTC contracts even though they have been embroiled in legal troubles with the government.

For example, Coopers & Lybrand, a major accounting firm, ranks fifth among RTC contractors, with $38.3 million in estimated fees for itself and two joint ventures for similar asset management jobs.

Yet on July 3, the firm agreed to pay the government $20 million in settlement after charges that its auditing procedures contributed to the collapse of the Silverado Banking, Savings & Loan Assn., of which Neil Bush, the President’s son, was a director. Silverado’s collapse is expected to cost taxpayers an estimated $1.2 billion.

Coopers & Lybrand has been granted a special waiver to do business with the RTC.

In addition to Coopers & Lybrand, the RTC is doing business with Arthur Andersen, which is earning about $10.1 million in estimated fees, and with Grant Thornton, which is involved in a joint venture with BJF Group Ltd. that is expected to produce $12.4 million in estimated fees. Times researcher Murielle Gamache contributed to this article.

What the Contractors Do Asset management: Managers handle delinquent loans, negotiate new terms with borrowers and foreclose when necessary. For real estate properties, managers collect rents, arrange leases and hire subcontractors for maintenance and repairs. Managers also sell loans and properties.

Auditing and accounting: This involves keeping records for assets under RTC control.

Computer Services and database management: Contracts range from $24 million to develop a system for keeping track of real estate inventory to the purchase of computers for RTC local offices.

Due diligence: This is an inquiry into the value and salability of a piece of real estate. The investigation covers local market conditions, type of tenants in the building and the existence of lawsuits or liens against the property.

Full loan service: The company keeps records and collects payments on loans from failed thrifts.

How Analysis Was Done The Times’ computer-assisted study is based on an analysis of more than 20,000 contracts awarded by the Resolution Trust Corp. over the past two years.

In response to a Freedom of Information request filed with the RTC, the agency supplied The Times with paper records showing contract numbers, names of contractors, the type of service to be provided and the estimated fees to be paid.

These contract records were then entered into a database for analysis.

Firms that have joint ventures with other companies or have affiliates with contracts have been combined. The total fees are grouped together under the parent firm as a single number.

Top Contractors in the S&L; Cleanup Contractor/city (service rendered): 1 NCNB Texas National Bank, Dallas (Asset management) Number of contracts: 6 Estimated fees (millions): $95.28 Contractor/city (service rendered): 2 J.E. Robert Co., Alexandria, Va. (Asset management) Number of contracts: 5 Estimated fees (millions): $45.15 Contractor/city (service rendered): 3 BEI-Ritz Joint Venture, Dallas (Asset management) Number of contracts: 9 Estimated fees (millions): $43.14 Contractor/city (service rendered): 4 Midland Data Systems Inc., Shawnee Mission, Kan. (Full loan services, asset management, computer services and database management) Number of contracts: 3 Estimated fees (millions): $41.44 Contractor/city (service rendered): 5 Coopers & Lybrand, Washington (Asset management, auditing and accounting) Number of contracts: 31 Estimated fees (millions): $38.35 Contractor/city (service rendered): 6 Equitable Real Estate Investment, Atlanta (Full loan services, loan administration/consulting) Number of contracts: 2 Estimated fees (millions): $35.98 Contractor/city (service rendered): 7 Northcorp Realty Advisors, Dallas (Asset management) Number of contracts: 8 Estimated fees (millions): $30.64 Contractor/city (service rendered): 8 Standard Federal Savings Bank, Gaithersburg, Md. (Loan administration/consulting) Number of contracts: 2 Estimated fees (millions): $24.55 Contractor/city (service rendered): 9 IBM, Armonk, N.Y. (Computer services and database management) Number of contracts: 1 Estimated fees (millions): $24.31 Contractor/city (service rendered): 10 Altschuler, Melvoin & Glasser; Chicago (Asset management, auditing and accounting) Number of contracts: 9 Estimated fees (millions): $17.44 Contractor/city (service rendered): 11 Ralph Edgar Group Inc., Lake Geneva, Wis. (Asset management) Number of contracts: 10 Estimated fees (millions): $17.32 Contractor/city (service rendered): 12 Mortgage Guarantee Insurance Corp., Milwaukee (Auditing and accounting) Number of contracts: 4 Estimated fees (millions): $14.52 Contractor/city (service rendered): 13 Beverly Group Inc., Sacramento (Asset management) Number of contracts: 2 Estimated fees (millions): $13.36 Contractor/city (service rendered): 14 BJF/Grant Thornton Asset Management Co., Northbrook, Ill. (Asset management, auditing and accounting) Number of contracts: 36 Estimated fees (millions): $12.42 Contractor/city (service rendered): 15 Univest Financial Group Inc., Marrietta, Ga. (Due diligence) Number of contracts: 14 Estimated fees (millions): $12.41 Contractor/city (service rendered): 16 Onyx Asset Management/PMSI-RAM, Houston (Asset management) Number of contracts: 2 Estimated fees (millions): $11.66 Contractor/city (service rendered): 17 Real Estate Recovery Inc., Sterling, Va. (Asset management, due diligence) Number of contracts: 12 Estimated fees (millions): $10.96 Contractor/city (service rendered): 18 CB Commercial Real Estate Group Inc., Dallas (Real estate brokerage) Number of contracts: 152 Estimated fees (millions): $11.14 Contractor/city (service rendered): 19 Nationwide Microfilm Inc., Hillside, N.J. (Other consulting) Number of contracts: 3 Estimated fees (millions): $10.94 Contractor/city (service rendered): 20 Prentiss Properties Ltd., Dallas (Asset management) Number of contracts: 2 Estimated fees (millions): $10.79 Contractor/city (service rendered): 21 Arthur Andersen & Co., Washington (Asset management, auditing and accounting) Number of contracts: 80 Estimated fees (millions): $10.14 Contractor/city (service rendered): 22 Fiserv Inc., Milwaukee (Computer services and database management, auditing and accounting) Number of contracts: 7 Estimated fees (millions): $9.22 Contractor/city (service rendered): 23 Resolution Management Associates, Atlanta (Asset management) Number of contracts: 3 Estimated fees (millions): $8.99 Contractor/city (service rendered): 24 Maria Elena Torano Associates Inc., Miami (Asset management) Number of contracts: 5 Estimated fees (millions): $8.90 Contractor/city (service rendered): 25 Bohdan Associates, Gaithersburg, Md. (Computer services and database management) Number of contracts: 1 Estimated fees (millions): $8.81 Footnotes: 1. Totals for NCNB Texas National Bank include contracts awarded to Financial Resources Management Trust Co. and to Financial Resource Management, Inc., both Dallas-based, wholly-owned subsidiaries of NCNB. 2. Totals for BEI-Ritz Joint Venture include contracts awarded to BEI Management Inc. BEI-Ritz is a joint venture between Ester Ritz of Dallas and BEI Holdings Ltd., an Atlanta-based bank consulting and asset management firm. BEI Management is a subsidiary of BEI Holdings Ltd. 3. Totals for Midland Data Systems include contracts awarded to Midland Asset Management Inc. 4. Totals for Coopers & Lybrand include contracts awarded to two Coopers & Lybrand joint ventures--CLSAM, a joint venture formed with Sigma Asset Management and CLPRS, a joint venture formed with Preferred Relocation Services Inc. 5. BJF-Grant Thornton Asset Management Company is a joint venture formed by Grant Thornton and The BJF Group Ltd. for the specific purpose of conducting work for the RTC. Totals listed also include contracts awarded separately to the two firms. 6. Onyx Asset Management and PMSI-RAM are joint ventures which share the same office in Houston and work together on RTC projects. Ram Management Assoc. Inc. is a partner in both joint ventures. 7. Totals for Arthur Andersen & Co. include contracts for Andersen Consulting. The two firms are part of the same worldwide organization. 8. Totals for Maria Elana Torano Associates Inc. include contracts awarded to META/TECON Asset Management Group and METEC Asset Management Inc. Maria Torano is associated with all three ventures. 9. Ralph Edgar Group’s contracts have been canceled by the RTC. The firm was found to have violated rules by failing to disclose its default on a loan from an S&L.; Source: Los Angeles Times Computer Study of Resolution Trust Corp. contracts recorded through July 12