RTC Contract Overpayment Put at More Than $1 Million

Federal investigators have told Congress that the Resolution Trust Corp. violated its own contracting rules when it paid Arthur Andersen & Co. nearly $1.5 million for work originally estimated to cost $190,000 at the failed Homefed Savings Bank in San Diego.

The RTC, the agency handling the savings and loan cleanup, has asked Arthur Andersen, a major accounting firm, to return the overpayment, according to a report from the General Accounting Office, the investigative arm of Congress.

“Without proper authority” a manager in the RTC’s national sales center in Washington “improperly agreed to fee-rate increases” and asked the firm to do additional work not covered by the original contract, the GAO said in a report to Sen. Joseph I. Lieberman (D-Conn.), chairman of the Senate Governmental Affairs Committee’s subcommittee on regulation.

The Times obtained a copy of the GAO report, which has not been made public. It paints a picture of an agency without effective internal controls. “Although there may have been justification for some increase in the contract fee rates, the designated oversight manager had no assurances that the increases orally agreed to were appropriate, warranted and reasonable,” the GAO said.

Since it seized Homefed last July, the RTC has spent $90 million on professional fees. The money has gone to contractors such as Arthur Andersen, who review records and prepare the mortgages and other Homefed assets for sale.

The Times reported Tuesday that federal investigators are looking into the disappearance of valuable equipment used by contractors working at Homefed.

Arthur Andersen’s job was to review loan files in preparation for a September, 1992, assets sale. The RTC executive who approved the increased payments “said that the goal was to complete the work on time, not to worry about the exact cost of performing the work,” the GAO said.