RTC Lawyer’s Former Firm Gets Bulk of Work : Ethics: Agency rules forbid appearance of conflict. But protests have brought no disciplinary action.

A New York law firm has reaped nearly $5 million in contracts with the Resolution Trust Corp. since one of its lawyers moved to the government agency as an associate general counsel, documents show.

Ethics rules bar Sheila Cahill and her subordinates from dealing with her former law firm for two years. Despite those rules, Cahill or her two top aides approved contracts worth almost $4.5 million for Cadwalader, Wickersham & Taft after she joined the RTC in February, 1992, according to documents obtained by the Associated Press.

Those contracts make Cadwalader one of the RTC’s main outside contractors. Before Cahill’s move to the savings and loan regulatory agency, Cadwalader had received just $286,000 for tax work with the RTC, invoices show.

Colleagues in the counsel’s office protested from the start that Cahill’s office of asset disposition was overseeing business going to her old firm, documents show. One memo warned of “a potentially serious ethical issue” if a $3.5 million no-bid contract were awarded to Cadwalader.

An inspector general’s report late last year concluded there was an appearance of a conflict of interest that warranted further review, but the S&L; cleanup agency has yet to resolve the issue.

RTC rules provide a full range of punishments for conflicts of interest, ranging from verbal warning to suspension or dismissal.

Cahill did not return four calls to her office. Treasury Department spokeswoman Joan Logue-Kinder said the allegations “are being looked at through the appropriate channels.”

As the internal controversy escalated, Cahill sent a memo to agency officials on July 23, 1992, recusing herself from overseeing her former firm’s work in favor of a subordinate selected by the RTC general counsel’s office. She also indicated she was seeking a waiver of the agency’s ethics rules and expected her absence would be temporary. The waiver was never approved.

Less than two months after she recused herself, Cahill approved a Sept. 8, 1992, invoice for $50,219 to Cadwalader. The rest of the invoices name two attorneys who work directly for Cahill, Hu Benton and Maureen Bolton, as approving payments to the firm.

RTC ethics guidelines also stipulate: “Delegating authority to subordinate staff to act for you in these instances is inappropriate and must be avoided.”

“It sounds like an open-and-shut violation of rules,” said Bob Litan, a Brookings Institution scholar who serves on a congressional panel studying the S&L; crisis. “Obviously, it smells bad.”

Internal memos obtained by the AP indicate top RTC officials, including former general counsel Jerry Jacobs and Michael Jungman, the current head of the asset sales division, tried to craft a solution that would allow Cahill’s office to continue using the Cadwalader firm.

In one memo, former RTC associate general counsel Charles Barbera wrote that he and another official had warned Jacobs “there was a potentially serious ethical issue” if Cahill were allowed to sign the $3.5-million contract with Cadwalader.

“Subsequently, Mr. Jacobs advised . . . me that he had found a way around the ethical problem by signing the contract with Cadwalader himself,” Barbera wrote in a Jan. 28 memo.

Barbera, who did not return four phone calls from a reporter, was not the only official to raise questions about the arrangement. At least half a dozen others, including a top aide to Jacobs and members of the agency’s tax and legislative affairs offices, also lodged protests with RTC ethics officials.

Two agency sources said the inspector general recently began a second probe but only after officials from another agency, the Federal Deposit Insurance Corporation, complained about the RTC’s inaction.

Sources also said the report, to be completed in the next month, will reach the same conclusion as the first--that while Cahill’s arrangement presents the appearance of conflict, no disciplinary action is needed.

Since Jacobs left the agency, protests have been directed to his successor, acting general counsel Richard Aboussie.

Aboussie referred a reporter’s calls to the RTC press office.

“It’s very easy for someone to make accusations and suggest improprieties and have that produce a news story,” said RTC spokesman Steve Katsanos.

“It’s an entirely different matter with someone with the ability to look at all the facts . . .,” Katsanos said.

Cadwalader, Wickersham and Taft said in a statement: “It would be inappropriate for Cadwalader to comment. The RTC is a client of the firm. Inasmuch as the RTC regards this matter as confidential, the firm is bound to do the same.”