Lawyer, RTC at Odds Over Legal Defense : Law: Newport Beach office employee is trying to bill U.S. for $41,000 in costs of fighting disbarment proceedings that agency says weren’t job-related. He denies wrongdoing.

A lawyer in the Resolution Trust Corp.’s Newport Beach office is trying to bill the government $41,000 for costs incurred when he defended himself in a disbarment proceeding that an agency ethics officer subsequently concluded was not related to his job.

In addition, William Elsbury, the second-ranking attorney in the RTC’s Western regional office in Newport, sought legal help from a law firm that was doing business with the agency, an inspector general’s report found.

Elsbury has denied all wrongdoing and continues to press for payment of his legal bills by the RTC, the federal agency created to dispose of assets of failed savings and loans. Agency sources, speaking on condition of anonymity, said Tuesday that Elsbury has been told that he will be fired if he does not resign his $83,000-a-year post.

The inspector general reported April 14 that the RTC’s chief ethics officer in California concluded that Elsbury violated conflict-of-interest rules by dealing with the San Francisco law firm of Brobeck, Phleger & Harrison on contracts worth nearly $300,000 in the year after he hired them to represent him.

The internal report, a copy of which was obtained by the Associated Press, outlined those and other situations involving Elsbury. It also reported that his supervisor, Neil Van Winkle, approved numerous questionable billings.

Acting RTC General Counsel Richard T. Aboussie has not yet acted on the matter, drawing criticism from a member of a congressional panel studying the nation’s savings and loan scandal.

“The most disturbing question is why they didn’t do anything about this,” said Bob Litan, a Brookings Institution scholar who serves on the National Commission on Financial Institution Reform, Recovery and Enforcement. “Why would they sit on it if they had evidence that something was so fishy?”

RTC spokesman Steve Katsanos said the IG’s report is being reviewed by top agency officials.

“I think a decision will be made very soon as to what the course of action is,” Katsanos said. “We are confident that the case is being handled expeditiously and in a manner consistent with RTC’s legal and personnel administrative policies.”

The sources who said that Elsbury has been asked to resign also said the embattled attorney plans to fight the request, setting up a scenario in which Aboussie or another top RTC official may have to fire him.

“Bill has no intention of quitting,” Jeffrey Benice, Elsbury’s attorney, said Tuesday. Benice described the report’s findings as “patently false.” He also described the allegations as a vendetta launched against Elsbury by a disgruntled former employee.

Elsbury “was instructed to terminate an incompetent employee in the legal division, which he did,” said Benice, who is with Brobeck, Phleger & Harrison’s Newport Beach office. “That incompetent person . . . launched a vendetta against Bill” that included making false statements to the inspector general, Benice said.

Elsbury is preparing “ a significant whistle-blower action against the inspector general,” Benice said. “The IG violated his civil rights, failed to follow up on his complaints and disseminated a false report to the media . . . and, to date, Bill has never even seen a copy of that report.”

The report states that Elsbury submitted legal bills to the agency resulting from disbarment proceedings initiated against him in California. It also states that he wrongly tried to bill the agency for travel related to those court sessions.

The inspector general also found that Elsbury failed to disclose two alcohol-related driving convictions on his RTC job application--an omission that is grounds for immediate dismissal and possible criminal prosecution under federal employment guidelines.

Benice said Van Winkle advised Elsbury that he did not need to include those facts on his application. The report also states that Van Winkle and others initially signed off on Elsbury’s hiring of Brobeck.

Benice also said that his office was never in conflict when it came to representing Elsbury. “This office had a relationship with the RTC well before Bill was employed,” Benice said. “There was no conflict.”

According to the report, Elsbury bases his claim for payment on the assumption that former RTC attorney Evelyn Davidson provided tips that initiated the California State Bar proceedings.

The IG rejected that claim, however, noting that the pair of drunk-driving cases underlying the disbarment effort occurred in 1986 and 1987, before the RTC was even created.